<PAGE>
MESSAGE
FROM THE CHAIRMAN
F
or U.S. financial markets, 1998 will be remembered as a year of
remarkable contrasts. A year that included a breathtaking drop of over
19% in the Standard & Poor's 500 Stock Index from the middle of July to the end
of August, followed by a remarkable recovery that pushed the Index to new highs.
The Index finished 1998 with another impressive showing, rising 28.6%, making it
the fourth consecutive year of 20%+ returns, an unprecedented performance.
Analyzing '98 returns more closely shows that a relatively small number of the
very largest capitalization issues, such as Microsoft and Intel, had outstanding
performance, while many smaller capitalization issues within the S&P 500
provided only mediocre returns. As you continue to drop down in capitalization
size, the dichotomy in returns becomes even more dramatic. The Russell 2000
Index, the benchmark for the small-capitalization stock universe, actually had a
negative return of -2.6% for the year. The magnitude of the underperformance of
small-caps versus large-caps is extraordinary, and one would think, highly
unlikely to persist. International equities, as measured by the Morgan Stanley
EAFE (Europe, Australia, and Far East) Index, were up 20.3%, its best
performance since 1993.
Studying the disparity in returns for 1998 between small-caps and large-caps
could understandably cause some investors to lose patience with the small-cap
sector of the market. However, it is well to remember that different sectors of
the market, whether it be small-caps versus large-caps, value stocks versus
growth stocks, or domestic equities versus international equities, can go
through long periods of relative underperformance. For example, while small-caps
have lagged their large-cap brethren over the last several years, when you look
at longer stretches of time, the reverse is true. Figures compiled by Ibbotson
Associates show that for the period from 1925 through 1997, the compounded
annual rate of return for small-cap issues was 12.7%, versus 11.0% for large-cap
issues. This simply reinforces the importance of portfolio diversification; it
is extremely difficult to know when, for how long, and to what extent, one
sector of the market will be the shining star.
The following pages contain helpful and informative information on all of the
Portfolios within the Investors Mark Series Fund. We encourage you to take the
time to study the information provided by the various managers, and, as always,
we welcome your comments and questions.
Sincerely,
[/S/ ROBERT N. SAWYER]
Robert N. Sawyer
Chairman
1
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
LARGE CAP VALUE
At the risk of sounding like a broken record again, we opened last year's report
with a discussion of the market's style preferences between "value" and
"growth." We observed that the market had favored the growth style for the prior
four years, and that it might be time for a change. With the benefit of
hindsight . . . we were wrong. The market continued in its headlong pursuit of a
narrow group of big, high-quality growth companies, ignoring their already high
valuations and driving them even higher. The same observations we made a year
and two years ago still apply today, only more so.
The 28.6% annual return for the unmanaged Standard & Poor's 500 Stock Index
was driven by a few large companies concentrated in the technology and drug
industries. Annual returns for the largest 50 companies in the Index averaged
50.0%, while the other 450 companies returned an average of only 10.9%. While
this begins to tell the story of 1998, it only scratches the surface. Among the
largest 50 companies in the S&P 500, those 26 that had current yields (dividend
divided by price) lower than the S&P 500 had returns that averaged 69.8%. Among
the other 450 companies, the 244 that had current yields equaling or higher than
the S&P's 1.4% managed to produce an average return of only -1.5%! Thus the gap
between what we call the "Titanic 26" and the "Forgotten 244" was an enormous
72.3 percentage points.
While these companies surely deserve to sell at premiums, multiples as high as
these constitute a risk our discipline does not allow us to take. So long as
these market leaders continue to outperform, index funds will do well. When the
P/E premium narrows to more normal levels, index funds will lag. We are not
privileged to know exactly (or even approximately) when this will happen, but it
will happen. The bulls on these stocks and the even more outrageously valued
Internet stocks justify these extreme valuations with the observation that we
are in a new era, it is different this time and the old rules don't apply. Every
time that rationale has been used in the past, it has been proven wrong.
Most of the underperformance of the Portfolio can be attributed to three
factors. First, and most importantly, we had no participation in the
communication
services sector, which was 9% of the benchmark portfolio (the S&P/BARRA Value
Index) and the strongest performing sector by far. Second, the Portfolio was
overweighted in consumer cyclicals, and results there lagged the benchmark,
primarily because of weak performance in our retail and retail-related stocks.
Third, the Portfolio was underweighted relative to the benchmark in the second
strongest sector, consumer staples.
The Portfolio continues to have attractive valuation characteristics. The
average price/earnings ratio based on estimated earnings for 1999 is 16.1
compared to 24.5 times for the S&P 500. The average price/book ratio is 2.7
compared to 4.3 for the S&P 500. Also, the Portfolio's gross yield continues to
be higher and its volatility remains lower than corresponding figures for the
market. We continue to believe that the market's focus will ultimately shift
from growth stocks that have led the market for so long to investments with more
reasonable valuations of earnings and assets such as those that characterize our
value strategy. When that occurs, the Portfolio should provide more satisfying
positive returns in absolute and relative terms.
DAVID L. BABSON & CO. INC.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LARGE CAP VALUE PORTFOLIO VERSUS S&P 500
<S> <C>
Large Cap Value
Portfolio
11/13/97* $10,000
12/97 $9,696
12/98 $10,184
*COMMENCEMENT
**UNMANAGED INDEX
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were 5.03% and 1.71%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
<CAPTION>
LARGE CAP VALUE PORTFOLIO VERSUS S&P 500
<S> <C>
S&P 500**
11/13/97* $10,000
12/97 $10,010
12/98 $12,871
*COMMENCEMENT
**UNMANAGED INDEX
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were 5.03% and 1.71%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
</TABLE>
2
<PAGE>
LARGE CAP GROWTH
Volatility, spurred in part by large corporate mergers and Asia's recession,
marked the first half of 1998. By mid-July, the markets appeared to have put
market volatility behind them, establishing new record highs on the strength of
second quarter earnings. But the Asian Tigers did not rattle the U.S. markets as
badly as the lumbering Russian Bear. On August 17, Russia shocked the financial
world by effectively defaulting on its Soviet-era debt. Except for G-7
government securities, liquidity was drained from the global capital markets.
The vibrant U.S. economy faced a global slowdown and serious recessionary fears.
Events in far-away Moscow were one thing; the Federal Reserve Board was
confident that the International Monetary Fund would restore stability to global
credit markets and reign in contagion. But when the Long Term Capital Management
debacle broke in late September, the contagion hit home. Formerly illiquid
markets became rigid, few non-government bonds traded, and the unmanaged
Standard & Poor's 500 Stock Index declined -9.9% in the third quarter. These
developments demanded Federal Reserve action. The ensuing series of interest
rate cuts brought liquidity back to the markets.
The broad U.S. equity market went on to stage the strongest three-month
advance in 20 years. In the fourth quarter, the 23.7% total return (price change
and reinvested distributions) of the Large Cap Growth Portfolio outpaced the
21.3% return of the S&P 500 Index. Rebounding from third quarter lows, large-cap
stocks powered the S&P 500 Index to a record fourth consecutive annual return of
above 20%, with the Index recording a 28.6% return. The Large Cap Growth
Portfolio was up 24.4%.
The Portfolio invested in several of the sectors and companies that led the
market during 1998. The technology sector was the major beneficiary of the
fourth quarter rebound as investors rewarded companies that met earnings
expectations. Cisco Systems, the Portfolio's largest holding at year end, posted
a 66.5%
annual gain. Lucent Technologies' market value surpassed that of its former
parent, AT&T, and the stock engineered a 175.3% return. Microsoft's legal
difficulties and increased competition could not stop the software titan from
netting a 114.6% advance.
Going forward, we believe that liquidity, earnings certainty, and perceived
safety will remain paramount for investors. Our emphasis on high-quality growth
will continue. We will maintain our focus on companies that can benefit from the
low inflation environment, on technology companies poised to lead global
infrastructure and services demand, and on industries (financial services and
health care) that stand to reap the rewards of the aging U.S. population.
STEIN ROE & FARNHAM INC.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LARGE CAP GROWTH PORTFOLIO VERSUS S&P 500 INDEX
<S> <C>
Large Cap Growth Portfolio
11/13/97* $10,000
12/97 $10,710
12/98 $13,288
*COMMENCEMENT
**UNMANAGED INDEX
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were 24.35% and 28.82%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
<CAPTION>
LARGE CAP GROWTH PORTFOLIO VERSUS S&P 500 INDEX
<S> <C>
S&P 500**
11/13/97* $10,000
12/97 $10,610
12/98 $13,642
*COMMENCEMENT
**UNMANAGED INDEX
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were 24.35% and 28.82%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
</TABLE>
3
<PAGE>
MID CAP EQUITY
Performance in the fourth quarter was quite strong with the Mid Cap Equity
Portfolio returning 18.6% (price change and reinvested distributions), reversing
the decline of the first three quarters. Relative performance, however, was not
good in the fourth quarter, or for the year: the Portfolio trailed its
benchmark, the unmanaged Standard & Poor's Mid Cap Index, by approximately 9.0%
for the quarter and by 12.3% for the calendar year.
In 1998, the market was not focused on company fundamentals or on traditional
valuation criteria. The best ranked stocks, according to our price/earnings
factor, underperformed our equal-weighted universe by 12.1% in 1998. Since our
investment discipline focuses on finding companies with strong earnings and
stocks that are unappreciated in the marketplace, this poor return on value had
a negative effect on the Portfolio.
Our 1999 outlook calls for more of the same for the U.S. economy; that is,
slowing growth and low inflation. Corporate profits should grow at a slower pace
and we expect an increasing percentage of firms in our universe of potential
investments to report disappointing earnings. Inflation should remain in check
as global economic weakness offsets inflationary pressures from the tight U.S.
labor market.
The potential risks to the economy are many: continued weakness in Japan and
Brazil, political instability in Russia, continuing scandal in the U.S. Any of
these factors could have a significant negative impact on the U.S. stock market,
but at this writing, none of them seems to be an imminent danger. We continue to
expect positive returns from U.S. stocks over the next 12 to 18 months, but not
the strong performance we have seen over the past several years.
We continue to believe in our investment disciplines and expect that relative
performance will turn around in 1999. The market must eventually focus on
earnings and valuations. When the market returns to these fundamentals, the
Portfolio should perform very well.
STANDISH, AYER & WOOD, INC.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MID CAP EQUITY PORTFOLIO VERSUS S&P MID CAP INDEX
<S> <C>
Mid Cap Equity Portfolio
11/13/97* $10,000
12/97 $10,508
12/98 $11,247
*COMMENCEMENT
**UNMANAGED INDEX
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were 7.03% and 10.94%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
<CAPTION>
MID CAP EQUITY PORTFOLIO VERSUS S&P MID CAP INDEX
<S> <C>
S&P Mid Cap Index**
11/13/97* $10,000
12/97 $10,470
12/98 $12,488
*COMMENCEMENT
**UNMANAGED INDEX
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were 7.03% and 10.94%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
</TABLE>
4
<PAGE>
SMALL CAP EQUITY
The U.S. equity market ended 1998 on a strong note that masked what was a very
difficult year for small-capitalization equities. Global economic chaos, and the
fourth quarter flight-to-quality that ensued, served to extend the large-stock
market dominance that took hold in mid-1996.
No equity sector was spared as investors tried to front-run a potential
recession by flocking to U.S. Treasury issues, effectively freezing
non-government market liquidity. Federal Reserve easing reversed the capital
flows and the ensuing recovery was equally broad, but investor focus on
perceived safety, liquidity, and earnings certainty remained. Despite a 17.6%
fourth quarter gain in the unmanaged Standard & Poor's Small Cap Index, its 1998
return of -1.3% trailed the S&P 500 Index by an extraordinary 29.9%.
While relative small capitalization underperformance was disappointing, the
blue-chip market's seemingly endless march upward benefited the Small Cap Equity
Portfolio's restructuring. Smaller issues traded at relative valuation levels
not seen in 20 years, providing attractive purchase opportunities in diverse
sectors and industries. Emphasizing a secular, thematic growth orientation and
fundamental research, we increased the number of holdings of the portfolio to
one hundred at year-end, thereby moderating company-specific risk. The
small-capitalization equity market offered strong growth prospects and we placed
the largest relative bets in two dynamic industries, technology and consumer
cyclicals. Led by solid performance contributions from technology, the Portfolio
returned 13.1% (price change and reinvested distributions) in the fourth
quarter, but declined -16.2% for the fiscal year ended December 31, 1998.
With the restructuring nearing completion, we are excited about the
opportunities for growth in 1999.
Although forecasting equity market and economic developments is difficult, a
return to more normal levels of volatility should provide an investment
environment conducive to an extended small-capitalization rebound. We will
continue to employ a quantitative, fundamental approach to managing risk, with a
keen eye on reducing the Small Cap Equity Portfolio's volatility versus its
benchmark and its peer group.
STEIN ROE & FARNHAM INC.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SMALL CAP EQUITY PORTFOLIO VERSUS S&P 600 INDEX
<S> <C>
Small Cap Equity
Portfolio
11/13/97* $10,000
12/97 $9,720
12/98 $8,144
*COMMENCEMENT
**UNMANAGED INDEX
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were 16.22% and 16.60%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
<CAPTION>
SMALL CAP EQUITY PORTFOLIO VERSUS S&P 600 INDEX
<S> <C>
S&P 600**
11/13/97* $10,000
12/97 $10,204
12/98 $10,071
*COMMENCEMENT
**UNMANAGED INDEX
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were 16.22% and 16.60%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
</TABLE>
5
<PAGE>
GROWTH & INCOME
The Growth & Income Portfolio completed its fiscal year ended December 31, 1998
with a total return (price change and reinvested distributions) of 12.0%. Our
mid-year concerns regarding the future health of world markets turned out to be
extremely well-founded. As we feared, the Asian economic and currency crises,
along with economic problems in Russia, had a negative impact on U.S. corporate
profits and, more important, on U.S. investor confidence. The performance of the
Portfolio was affected as investors sought safety in large-capitalization growth
stocks with their attention focused on a very small number of the largest growth
stocks.
The economy continues to slow and financial markets have shown increased
volatility over evidence of a global credit crunch and concern that corporate
earnings may fall short of previous estimates. Nevertheless, it is our belief at
this time that the U.S. economy has reached not a recession point, but rather a
turning point toward slower growth. Consumer activity, well over half the
economy, continues to provide support for growth with continuing gains in job
creation, income and spending. Business spending, however, is slowing and
recession abroad is likely to reduce exports. Both developments should have a
flattening effect on corporate profit growth.
Overall, we believe gross domestic product is likely to grow at an annual rate
of approximately 2% during the next 6 to 12 months. U.S. interest rates have
fallen, reflecting slowing growth and continuing low inflation, and the Federal
Reserve Board should remain accommodative. In sum, it is our view that the
underpinnings of sound equity markets remain in place, while price declines in
the fourth quarter have
created more opportunities for long-term investors. The Growth & Income
Portfolio continues to emphasize value opportunities in the domestic economy,
including food, health care services, entertainment and communications stocks.
Thank you for your continued confidence in the Growth & Income Portfolio. We
look forward to helping you achieve your financial goals in the years ahead.
LORD, ABBETT & CO.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH & INCOME PORTFOLIO VERSUS S&P 500
<S> <C>
Growth & Income Portfolio
11/12/97* $10,000
12/97 $10,425
12/98 $11,679
*COMMENCEMENT
**UNMANAGED INDEX
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were 12.03% and 14.67%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
<CAPTION>
GROWTH & INCOME PORTFOLIO VERSUS S&P 500
<S> <C>
S&P 500**
11/12/97* $10,000
12/97 $10,736
12/98 $13,804
*COMMENCEMENT
**UNMANAGED INDEX
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were 12.03% and 14.67%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
</TABLE>
6
<PAGE>
BALANCED
Performance for the Balanced Portfolio improved greatly during the fourth
quarter with a total return (price change and reinvested distributions) of 4.9%.
For the fiscal year ended December 31, 1998, the Balanced Portfolio posted a
negative return of -6.0%. It is important to understand that adverse asset
allocation in the short term was primarily responsible for the weak returns. Our
style of balanced management is very unique and often has a low correlation to
its peer group. Over the long term, we believe this unique style has the
potential to produce positive returns.
Asset allocation of a typical balanced portfolio is generally 70% stocks and
30% investment-grade bonds. The Balanced Portfolio ended the year at
approximately 40% stocks and 60% high-yield corporate and convertible bonds.
While the stock portion produced positive results (total return of approximately
+10%), the Portfolio was hit very hard by negative total returns on high-yield
convertible and corporate bond holdings. During 1998, the stock and bond markets
experienced a flight-to-quality due to fallout from the Asian crisis and fear of
a U.S. recession. Thus, both high-quality bonds and large-capitalization stocks
were in high demand. These trends heavily favored the asset mix of a traditional
balanced portfolio.
High-yield bonds suffered as corporate bond rates soared in anticipation of a
recession. The average high-yield portfolio, as measured by LIPPER ANALYTICAL
SERVICES, experienced a negative return of -0.2% for 1998. High-yield
convertible bonds were hit even harder as they experienced the pressure of
rising bond yields and falling stock prices. The majority of high-yield
convertible bonds are issued by small companies; small-capitalization stocks
also had negative returns in 1998. The Merrill Lynch Small Company Convertible
Bond Index fell -8.1% during 1998. The weak returns in these latter asset
classes were the major reason for the Portfolio's negative return in 1998.
On a positive note, these types of negative trends were experienced in both
1990 and 1994 and were subsequently followed by years of very strong
performance. Although it is too early to say we have definitely seen the bottom,
we have seen a recovery in both markets thus far in 1999. We plan to continue
adding selective corporate and convertible securities to the Portfolio as we
believe these sectors of the market are extremely undervalued. The Portfolio
currently produces a high level of current income for a balanced portfolio (6.2%
current yield). Eventually there will be a change in a market environment that
has favored ONLY Treasury bonds and large company stocks. When this change takes
place, the Balanced Portfolio should be a major beneficiary.
KORNITZER CAPITAL MANAGEMENT, INC.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BALANCED PORTFOLIO VERSUS S&P 500 AND MERRILL LYNCH BOND FUND INDEX WEIGHTED AVERAGE
<S> <C> <C>
Balanced Portfolio
11/13/97* $10,000
12/97 $10,019
12/98 $9,414
*COMMENCEMENT
**UNMANAGED INDICES
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were -6.03% and -5.24%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
<CAPTION>
BALANCED PORTFOLIO VERSUS S&P 500 AND MERRILL LYNCH BOND FUND INDEX WEIGHTED AVERAGE
<S> <C>
S&P 500 & ML Bond Fund
Weighted Average**
11/13/97* $10,000
12/97 $10,179
12/98 $11,357
*COMMENCEMENT
**UNMANAGED INDICES
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were -6.03% and -5.24%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
</TABLE>
7
<PAGE>
INTERMEDIATE FIXED INCOME
The fourth quarter of 1998 capped what was already a remarkable year. The roots
of the year's path were drawn in 1997 when the emerging market crisis began in
Thailand. This spread to other emerging markets, then to established non-dollar
markets, and finally to the United States in late third quarter. Its effect (and
that of Long Term Capital Management) was to raise investors' awareness of risk,
engineering a flight-to-quality and driving down the value of non-Treasury
securities. It was only when the Federal Reserve lowered interest rates and
structured the rescue of Long Term Capital Management that we saw the beginning
of a return to more normal conditions in financial markets.
The Portfolio was defensively positioned for a moderate flight-to-quality, but
the result of the August to October rout of non-Treasury issues led to
underperformance. The Portfolio's holdings in both mortgages and corporates
suffered, but it was the latter group particulary that was impacted. This was
especially evident in the financial sector where issuers in the REIT and
subprime lending groups were under great pressure. These positions represented
mostly good companies from a credit standpoint, but the fear of risk drove down
their prices. Given our positive outlook for the domestic, as well as global
economy, we found that the historically attractive yields offered by these
securities made them appropriate for addition to the Portfolio. Therefore, we
increased our positions in mortgages and corporates since mid-October, funding
the purchases with the sale of U.S. Treasuries.
We believe that the Portfolio now should be well positioned going forward to
take advantage of a return to more normal conditions in world financial markets
and to provide an attractive level of income and total return on both a real and
relative basis.
STANDISH, AYER & WOOD, INC.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTERMEDIATE FIXED INCOME PORTFOLIO VERSUS LEHMAN AGGREGATE BOND INDEX
<S> <C>
Intermediate Fixed Income
Portfolio
11/13/97* $10,000
12/97 $10,127
12/98 $10,650
*COMMENCEMENT
**UNMANAGED INDEX
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were 5.16% and 5.72%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
<CAPTION>
INTERMEDIATE FIXED INCOME PORTFOLIO VERSUS LEHMAN AGGREGATE BOND INDEX
<S> <C>
Lehman ABI**
11/13/97* $10,000
12/97 $10,143
12/98 $11,022
*COMMENCEMENT
**UNMANAGED INDEX
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were 5.16% and 5.72%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
</TABLE>
8
<PAGE>
GLOBAL FIXED INCOME
Global bond markets produced high, positive returns during the year with the
benchmark J.P. Morgan Hedged Global Government Bond Index returning 0.49% in the
fourth quarter and 11.42% for the year ended December 31, 1998. Financial
markets in 1998 were driven largely by the crisis in emerging market economies.
The year began with the emerging market currency crisis in full swing in Asia.
By Autumn, the Russian currency and capital markets collapsed. At year end,
Brazil and other Latin markets were seriously threatened. The effect of the
crisis was a reduction in world growth, lower commodity prices and a flight to
government bonds, primarily U.S. Treasuries. This flight-to-quality precipitated
the collapse of several hedge funds, including Long Term Capital Management. As
hedge funds unwound their positions, credit-sensitive sectors of the financial
markets underperformed and liquidity was removed from the market. In the end,
the disinflationary impact of the emerging market crisis positively affected
developed bond markets when central banks lowered rates to counter the negative
growth impact of the crisis.
During the year the Portfolio benefited from favorable country selection
particularly with overweight positions in the UK and other European markets and
an underweight position in the Japanese bond market. The Portfolio was
overweight in the U.S. market, which modestly detracted from performance.
Security selection negatively impacted the performance. In particular, our
weighting in corporate bonds underperformed when investors sold credit-sensitive
sectors and bought government bonds. The Portfolio also suffered from a short
position in the Japanese yen when the yen rallied in the latter part of the
year. On the other hand, the duration of the Portfolio was longer than the
benchmark, which was advantageous during this period of declining interest
rates.
We believe that the Portfolio is well positioned for 1999. Global bond markets
still offer value in an environment where world growth is restrained by the
emerging market crisis. In addition, the Portfolio holds a portion of attractive
corporate securities that offer exceptional yield advantage relative to
government bonds. Although the road ahead is likely to be bumpy, this could be
one of the best times since the early '90s to invest in corporate bonds. We
believe that the yield advantage and the potential for spread contraction in the
Portfolio will add value relative to the benchmark over the next few years.
STANDISH INTERNATIONAL MANAGEMENT CO., L.P.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GLOBAL FIXED INCOME PORTFOLIO VERSUS JP MORGAN HEDGED GLOBAL GOVERNMENT BOND INDEX
<S> <C>
Global Fixed Income
Portfolio
11/13/97* $10,000
12/97 $10,170
12/98 $10,905
*COMMENCEMENT
**UNMANAGED INDEX
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were 7.23% and 7.95%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
<CAPTION>
GLOBAL FIXED INCOME PORTFOLIO VERSUS JP MORGAN HEDGED GLOBAL GOVERNMENT BOND INDEX
<S> <C>
JPM HGGB Index**
11/13/97* $10,000
12/97 $10,176
12/98 $11,338
*COMMENCEMENT
**UNMANAGED INDEX
Average annual compounded total returns for one year and the life of the Portfolio
(commencement November 13, 1997) as of December 31, 1998, were 7.23% and 7.95%, respectively.
Performance data contained in this report is for past periods only.
Past performance is not predictive of future performance. Investment return and share value
will fluctuate, and redemption value may be more or less than original cost.
</TABLE>
9
<PAGE>
MONEY MARKET
The first quarter of 1998 was a period of volatile interest rate movements due
to the on-again, off-again expectation that the U.S. economy would be materially
impacted by Asia's economic malaise. By March, the markets were expecting a
modest negative impact. During the second quarter, the consensus was the U.S.
economy would endure a more measurable impact from Asia. As Asia's economic and
liquidity problems intensified, U.S. Treasuries benefited from a
flight-to-quality. The yield curve flattened to 17 basis points between the
two-year Treasury note and the 30-year Treasury bond, with the bond dropping to
5.57%, its lowest yield since 5.79% in October 1993.
As global problems spread to Russia and South America, Treasury yields
continued to fall. By the end of the third quarter, all Treasury issues were
yielding below 5%. On September 25, the Federal Reserve's Open Market Committee
made the first of three cuts in short-term interest rates in an effort to
improve market liquidity.
Bond prices continued to experience a fair amount of volatility in the fourth
quarter. After the global liquidity crisis peaked in early October, corporate
bond trading slowed to a crawl for even the most credit-worthy issuers. With
liquidity dried up, the flight to U.S. Treasuries intensified. The Fed responded
by lowering short-term interest rates on October 15 and then again on November
23. These rate cuts returned liquidity and confidence to the market and allowed
corporate bond spreads to move off their wide levels by the end of December.
While the U.S. economy posted a strong fourth quarter GDP of 5.6%,
expectations are set for a moderating 1999 global economy. We expect the U.S.
economy to expand at a subdued pace of 2%; however, efforts from Asia and South
America to stabilize their respective economics will, in large part, determine
the pace of the global economy and the volatility of financial markets.
Federal Reserve Chairman Alan Greenspan has indicated that the Fed is unlikely
to ease further given the fourth quarter pace of the U.S. economy and a strong
U.S. stock market. However, the Asian and South American economies remain
fragile: Japan
remains deep in the throws of a recession and Brazil's weakened currency
threatens the country with higher inflation and a subsequent recession. The
dichotomy of a strong U.S. economy with a weak South America and Japan, means
any market or Fed policy prognostications is a speculative exercise.
Average annual compounded total returns for one year and the life of the
Portfolio (commencement November 13, 1997) as of December 31, 1998, were 5.05%
and 5.11%, respectively. Performance data contained in this report is for past
periods only. Past performance is not predictive of future performance. Money
market funds are neither insured nor guaranteed by the U.S. Government. There is
no assurance that the fund will maintain a stable net asset value of one dollar
per share.
STANDISH, AYER & WOOD, INC.
10
<PAGE>
LARGE CAP
VALUE
STATEMENT OF NET ASSETS
December 31, 1998
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
--------------------------------------------------------------------------
COMMON STOCKS -- 96.24%
BASIC MATERIALS -- 13.21%
1,230 duPont (E.I.) deNemours & Co..................... $ 65,267
300 Martin Marietta Materials, Inc................... 18,656
2,140 Millennium Chemicals, Inc........................ 42,532
2,000 Potlatch Corp.................................... 73,750
3,050 USX-U.S. Steel Group............................. 70,150
1,480 Weyerhaeuser Co.................................. 75,202
2,400 Willamette Industries, Inc....................... 80,400
-------------
425,957
CAPITAL GOODS -- 6.96%
2,540 Boeing Co........................................ 82,867
1,850 Dana Corp........................................ 75,619
780 Lockheed Martin Corp............................. 66,105
-------------
224,591
CONSUMER CYCLICAL -- 15.08%
1,450 Harcourt General, Inc............................ 77,122
5,420 Kmart Corp.*..................................... 82,994
2,710 The Limited, Inc................................. 78,929
1,680 Penney (J.C.), Inc............................... 78,750
5,700 Reebok International Ltd......................... 84,788
1,970 Sears, Roebuck & Co.............................. 83,725
-------------
486,308
CONSUMER STAPLES -- 2.27%
1,582 Diageo PLC....................................... 73,167
-------------
ENERGY -- 4.49%
1,100 Atlantic Richfield Co............................ 71,775
1,530 Royal Dutch Petroleum Co......................... 73,249
-------------
145,024
FINANCIAL -- 27.59%
1,000 Aetna, Inc....................................... 78,625
2,080 Allstate Corp.................................... 80,340
770 American Express Co.............................. 78,732
1 Berkshire Hathaway, Inc. Cl. A*.................. 73,500
1,280 Chase Manhattan Corp............................. 87,120
1,550 Citigroup, Inc................................... 76,725
1,090 National City Corp............................... 79,025
1,700 SLM Holding Corp................................. 81,600
450 Student Loan Corp................................ 20,194
720 Transamerica Corp................................ 83,160
2,000 U.S. Bancorp..................................... 71,000
2,000 Wells Fargo & Co................................. 79,875
-------------
889,896
HEALTHCARE -- 4.73%
3,140 Tenet Healthcare Corp............................ 82,425
1,630 United Healthcare Corp........................... 70,192
-------------
152,617
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
MISCELLANEOUS -- 1.21%
1,000 Hanson PLC, ADR.................................. $ 39,000
-------------
TECHNOLOGY -- 11.16%
2,120 Apple Computer, Inc.............................. 86,787
520 International Business Machines Corp............. 96,070
3,580 Wallace Computer Services, Inc................... 94,423
700 Xerox Corp....................................... 82,600
-------------
359,880
TRANSPORTATION & SERVICES -- 4.56%
1,690 CSX Corp......................................... 70,135
2,570 KLM Royal Dutch Airlines......................... 77,100
-------------
147,235
UTILITIES -- 4.98%
3,400 Illinova Corp.................................... 85,000
1,620 Texas Utilities Co............................... 75,634
-------------
160,634
TOTAL COMMON STOCKS
(Cost $3,122,092)........................................... 3,104,309
-------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
FACE
AMOUNT DESCRIPTION MARKET VALUE
--------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 11.16%
$ 360,000 UMB Bank, n.a.,
4.35% due 1/04/99
(Collateralized by U.S.
Treasury Notes, 5.875%
due 2/28/99 with a
value of $376,549)
(Cost $360,000).............................. 360,000
-------------
TOTAL INVESTMENTS -- 107.40%
(Cost $3,482,092)............................................ 3,464,309
Other assets less liabilities -- (7.40%)..................... (238,626)
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $9.88 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 326,573 shares outstanding)...................... $ 3,225,683
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS OWNED AT
DECEMBER 31, 1998, WAS $3,482,092. NET UNREALIZED DEPRECIATION FOR FEDERAL
INCOME TAX PURPOSES WAS $17,783, WHICH IS COMPRISED OF UNREALIZED APPRECIATION
OF $266,238 AND UNREALIZED DEPRECIATION OF $284,021.
* NON-INCOME PRODUCING SECURITY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
LARGE CAP
GROWTH
STATEMENT OF NET ASSETS
December 31, 1998
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
--------------------------------------------------------------------------
COMMON STOCKS -- 90.70%
CONSUMER CYCLICAL -- 17.66%
1,500 Disney (Walt) Co................................. $ 45,000
900 General Electric Co.............................. 91,856
1,000 Home Depot, Inc.................................. 122,374
1,600 Kohl's Corp...................................... 98,300
2,000 Time-Warner, Inc................................. 124,125
800 Walgreen Co...................................... 46,850
-------------
528,505
CONSUMER STAPLES -- 6.87%
900 Coca-Cola Co..................................... 60,188
1,500 Gillette Co...................................... 72,469
800 Procter & Gamble Co.............................. 73,050
-------------
205,707
ENERGY -- 1.23%
800 Schlumberger Ltd................................. 36,900
-------------
FINANCIAL -- 13.35%
800 American Express Co.............................. 81,800
850 American International Group, Inc. .............. 82,131
1,000 Bankamerica Corp................................. 60,125
1,600 Citigroup, Inc. ................................. 79,200
1,300 Federal National Mortgage Assn................... 96,200
-------------
399,456
HEALTHCARE -- 19.68%
700 Cardinal Health, Inc............................. 79,669
800 Johnson & Johnson................................ 67,100
1,000 Lilly (Eli) & Co................................. 88,875
1,400 Medtronic, Inc................................... 103,950
500 Merck & Co., Inc................................. 73,844
800 Pfizer, Inc...................................... 100,350
1,000 Warner-Lambert Co................................ 75,188
-------------
588,976
MISCELLANEOUS -- 2.75%
1,600 Paychex, Inc..................................... 82,300
-------------
TECHNOLOGY -- 29.16%
1,600 Cisco Systems, Inc.*............................. 148,500
1,000 EMC Corp. MA..................................... 85,000
1,700 Ericsson (L.M.) Telephone Cl. B.................. 40,694
700 Intel Corp....................................... 82,993
900 Lucent Technologies.............................. 99,000
300 MCI Worldcom, Inc. .............................. 21,525
700 Microsoft Corp................................... 97,081
1,200 Motorola, Inc.................................... 73,275
1,500 Tellabs, Inc..................................... 102,844
1,700 WorldCom, Inc. .................................. 121,975
-------------
872,887
TOTAL COMMON STOCKS
(Cost $1,889,964)............................................ 2,714,731
-------------
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 9.02%
$ 270,000 UMB Bank, n.a.,
4.35% due 1/04/99
(Collateralized by U.S.
Treasury Notes, 5.875%
due 2/28/99 with a
value of $282,667)
(Cost $270,000).............................. $ 270,000
-------------
TOTAL INVESTMENTS -- 99.72%
(Cost $2,159,964)............................................ 2,984,731
Other assets less liabilities -- 0.28%....................... 8,412
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $13.31 per share; 500,000,000 shares of $.001
par value capital shares authorized; 224,852 shares
outstanding)................................................. $ 2,993,143
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS OWNED AT
DECEMBER 31, 1998, WAS $2,162,883. NET UNREALIZED APPRECIATION FOR FEDERAL
INCOME TAX PURPOSES WAS $821,848, WHICH IS COMPRISED OF UNREALIZED APPRECIATION
OF $864,221 AND UNREALIZED DEPRECIATION OF $42,373.
* NON-INCOME PRODUCING SECURITY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
MID CAP
EQUITY
STATEMENT OF NET ASSETS
December 31, 1998
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
--------------------------------------------------------------------------
COMMON STOCKS -- 98.77%
BASIC MATERIALS -- 1.24%
400 Air Products & Chemicals......................... $ 16,000
300 Ashland, Inc..................................... 14,512
-------------
30,512
CAPITAL GOODS -- 6.09%
400 Centex Corp...................................... 18,025
450 Crane............................................ 13,584
600 Ingersoll-Rand Co................................ 28,163
300 Lafarge Corp..................................... 12,150
400 Precision Castparts Corp......................... 17,700
500 Southdown, Inc................................... 29,594
600 Sundstrand Corp.................................. 31,125
-------------
150,341
CONSUMER CYCLICAL -- 20.33%
200 American Greetings............................... 8,213
1,300 Brightpoint, Inc.*............................... 17,875
1,100 CKE Restaurants*................................. 32,381
300 Eastman Kodak Co................................. 21,600
704 Flowers Industries, Inc.......................... 16,844
400 Furniture Brands Int'l.*......................... 10,900
700 Interim Services*................................ 16,362
600 Jones Apparel Group, Inc.*....................... 13,237
500 Kroger Co.*...................................... 30,250
700 Miller (Herman).................................. 18,813
1,300 Navistar Int'l.*................................. 37,050
400 Office Depot, Inc.*.............................. 14,775
500 Omnicom Group.................................... 29,000
500 Robert Half International, Inc.*................. 22,344
400 Ross Stores, Inc................................. 15,750
700 Safeway, Inc.*................................... 42,656
500 Stewart Enterprises.............................. 11,125
800 Supervalu, Inc................................... 22,400
1,200 TJX Cos., Inc.................................... 34,800
400 Tommy Hilfiger Corp.*............................ 24,000
300 VF Corp.......................................... 14,062
400 Xerox Corp....................................... 47,200
-------------
501,637
CONSUMER STAPLES -- 11.07%
500 Amgen, Inc....................................... 52,281
800 Bergen Brunswig Cl. A............................ 27,900
400 Heinz (H.J.) Co.................................. 22,650
500 IBP, Inc......................................... 14,562
600 Kaufman & Broad Home............................. 17,250
700 Knight-Ridder, Inc............................... 35,788
500 Owens-Illinois*.................................. 15,312
600 Philip Morris Companies, Inc..................... 32,100
600 Schering-Plough.................................. 33,150
804 Universal Foods.................................. 22,056
-------------
273,049
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
ENERGY -- 7.91%
700 American Power Conversion*....................... $ 33,906
412 British Petroleum ADR............................ 36,926
200 Chevron Corp..................................... 16,587
800 Coastal Corp..................................... 27,950
300 DTE Energy....................................... 12,862
800 El Paso Energy Corp.............................. 27,850
400 Exxon Corp....................................... 29,250
200 Seacor Smith, Inc.*.............................. 9,887
-------------
195,218
FINANCIAL -- 18.56%
600 Allstate Corp.................................... 23,175
1,000 Americredit Corp.*............................... 13,812
400 AMR Corp.*....................................... 23,750
900 Amsouth Bancorp.................................. 41,063
300 BB & T Corp...................................... 12,094
3 Chase Manhattan Corp............................. 215
400 Comerica, Inc.................................... 27,275
1,000 Conseco, Inc..................................... 30,563
300 Cullen/Frost Bankers............................. 16,463
400 Equity Office Properties Trust................... 9,600
600 First Tennessee National......................... 22,838
500 First Union Corp................................. 30,406
200 Golden West Financial Co......................... 18,338
408 Liberty Property Trust........................... 10,047
600 MGIC Investment Corp............................. 23,888
6 North Fork Bancorp............................... 148
300 PMI Group, The................................... 14,813
600 Prentiss Properties Trust........................ 13,387
301 Relistar Financial Corp.......................... 13,884
600 Standard & Poor's 400 Mid-Cap Depository
Receipts..................................... 43,650
502 Standard & Poor's 500 Depository Receipts........ 61,746
300 Starwood Lodging Trust........................... 6,806
-------------
457,961
HEALTHCARE -- 7.52%
400 Amerisource Health*.............................. 26,000
700 HCR Manor Care*.................................. 20,563
400 Lilly (Eli) & Co................................. 35,550
600 Mylan Laboratories............................... 18,900
700 Omnicare, Inc.................................... 24,325
400 Orthodontic Centers of America*.................. 7,775
800 Safeskin Corp.*.................................. 19,300
400 STERIS Corp.*.................................... 11,375
800 Sybron Corp.*.................................... 21,750
-------------
185,538
</TABLE>
13
<PAGE>
MID CAP
EQUITY (CONTINUED)
STATEMENT OF NET ASSETS
December 31, 1998
<TABLE>
<CAPTION>
SHARES COMPANY MARKET VALUE
--------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY -- 16.01%
800 Apple Computer*.................................. $ 32,750
400 Cordant Technologies............................. 15,000
500 Diebold, Inc..................................... 17,844
1,400 DSP Communications............................... 21,437
900 Networks Association*............................ 59,625
1,000 Oracle Systems Corp.*............................ 43,125
800 Sun Microsystem, Inc.*........................... 68,500
500 Symbol Technologies.............................. 31,969
600 Synopsys, Inc.*.................................. 32,550
300 Tech Data Corp.*................................. 12,075
800 Unisys Corp.*.................................... 27,550
300 United Technologies.............................. 32,625
-------------
395,050
TRANSPORTATION & SERVICES -- 2.13%
300 Continental Airlines*............................ 10,050
500 Trinity Industries............................... 19,250
800 US Freightways Corp.............................. 23,300
-------------
52,600
UTILITIES -- 7.91%
402 A T & T Corp..................................... 30,251
800 Bell Atlantic Corp............................... 45,450
1,207 BellSouth Corp................................... 60,219
600 Century Telephone Enterprises.................... 40,500
300 FPL Group, Inc................................... 18,487
6 U S West, Inc.................................... 388
-------------
195,295
TOTAL COMMON STOCKS
(Cost $2,131,066)............................................. 2,437,201
-------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
FACE
AMOUNT DESCRIPTION MARKET VALUE
--------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.85%
$ 21,000 State Street Bank and Co.,
3.50% due 1/04/99
(Collateralized by U.S.
Treasury Notes, 7.50%
due 2/15/05 with a
value of $23,450)
(Cost $21,000)............................... $ 21,000
-------------
TOTAL INVESTMENTS -- 99.62%
(Cost $2,152,066)........................................... 2,458,201
Other assets less liabilities -- 0.38%...................... 9,413
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $11.11 per share; 500,000,000 shares of $.001
par value capital shares authorized; 222,014 shares
outstanding)................................................ $ 2,467,614
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS OWNED AT
DECEMBER 31, 1998, WAS $2,160,393. NET UNREALIZED APPRECIATION FOR FEDERAL
INCOME TAX PURPOSES WAS $297,808, WHICH IS COMPRISED OF UNREALIZED APPRECIATION
OF $382,670 AND UNREALIZED DEPRECIATION OF $84,862.
* NON-INCOME PRODUCING SECURITY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
SMALL CAP
EQUITY
STATEMENT OF NET ASSETS
December 31, 1998
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
--------------------------------------------------------------------------
COMMON STOCKS -- 85.45%
BASIC MATERIALS -- 1.15%
500 Stillwater Mining Co............................. $ 20,500
-------------
CAPITAL GOODS -- 5.83%
200 Applied Power, Inc. Cl. A........................ 7,550
400 Champion Enterprises, Inc.*...................... 10,950
700 D R Horton, Inc.................................. 16,100
800 Fastenal Co...................................... 35,200
300 Motive Power Industries, Inc.*................... 9,656
300 Orbital Sciences Corp............................ 13,275
200 SPS Technologies, Inc.*.......................... 11,325
-------------
104,056
CONSUMER CYCLICAL -- 25.36%
400 ADVO, Inc........................................ 10,550
200 Alpharma, Inc.................................... 7,062
200 CEC Entertainment*............................... 5,550
400 Cheesecake (The) Factory*........................ 11,862
330 CKE Restaurants, Inc.*........................... 9,714
2,500 Columbia Sportswear.............................. 42,187
200 Consolidated Graphics*........................... 13,513
200 Ethan Allen Interiors............................ 8,200
500 HA-LO Industries, Inc.*.......................... 18,813
200 Henry (Jack) & Associates, Inc................... 9,950
700 Just For Feet*................................... 12,162
400 K-Swiss, Inc. Cl. A.............................. 10,750
500 Linens'n Things, Inc.*........................... 19,813
500 Men's Wearhouse, Inc.*........................... 15,875
1,100 Metamor Worldwide................................ 27,500
800 Metro Networks................................... 34,100
300 Mohawk Industries, Inc.*......................... 12,619
2,200 Nu Skin Asia Pacific Cl. A....................... 51,975
200 O'Reilly Automotive*............................. 9,450
200 Polaris Industries, Inc.......................... 7,837
500 Ruby Tuesday, Inc................................ 10,625
500 School Specialty, Inc............................ 10,687
200 Scotts Co. Ohio Cl. A*........................... 7,688
400 Smithfield Foods, Inc.*.......................... 13,550
1,600 Triarc Cos. Cl. A................................ 25,600
2,200 USA Floral Products.............................. 25,300
500 Williams Sonoma, Inc.*........................... 20,156
-------------
453,088
CONSUMER STAPLES -- 2.68%
400 Aptargroup, Inc.................................. 11,225
200 Canadaigua Brands, Inc. Cl. A.................... 11,563
300 Earthgrains Co................................... 9,281
400 Liposome (The) Company, Inc.*.................... 6,175
200 Whole Food Market, Inc........................... 9,675
-------------
47,919
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
ENERGY -- 0.67%
500 Barrett Resources Co............................. $ 12,000
-------------
FINANCIAL -- 6.27%
200 Centura Banks, Inc............................... 14,875
200 Commerce Bancorp*................................ 10,500
300 Cullen Frost Bankers, Inc........................ 16,463
300 Heller Financial, Inc............................ 8,813
300 Jefferies Group, Inc............................. 14,887
800 National Bancorp Alaska, Inc..................... 27,000
100 SEI Investments.................................. 9,938
500 SPSS, Inc........................................ 9,437
-------------
111,913
HEALTHCARE -- 8.51%
300 Barr Laboratores, Inc.*.......................... 14,400
300 Biomatrix, Inc.*................................. 17,475
300 Express Scripts*................................. 20,138
400 Idexx Laboratories, Inc.*........................ 10,762
800 Orthodontic Centers of America*.................. 15,550
500 Renal Care Group, Inc.*.......................... 14,406
300 Schein (Henry), Inc.............................. 13,425
200 Uroquest Medical Corp............................ 200
1,425 Xomed Surgical Products.......................... 45,600
-------------
151,956
MISCELLANEOUS -- 8.15%
500 American Management Systems, Inc.*............... 20,000
600 DeVry, Inc....................................... 18,375
200 Dionex Corp.*.................................... 7,325
200 G & K Services, Inc.............................. 10,650
50 Inktomi Corp.*................................... 6,469
1,200 Interim Services, Inc............................ 28,050
500 Iron Mountain, Inc.*............................. 18,031
300 Mercury Interactive Corp......................... 18,975
300 Parexel International Corp....................... 7,500
200 Paychex, Inc..................................... 10,287
-------------
145,662
</TABLE>
15
<PAGE>
SMALL CAP
EQUITY (CONTINUED)
STATEMENT OF NET ASSETS
December 31, 1998
<TABLE>
<CAPTION>
SHARES COMPANY MARKET VALUE
--------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY -- 25.72%
400 Acxiom Corp.*.................................... $ 12,400
200 Alliant Techsystems, Inc......................... 16,488
200 BISYS Group*..................................... 10,325
1,700 Barra, Inc....................................... 40,162
800 Brightpoint, Inc.*............................... 11,000
200 Burr Brown Corp.*................................ 4,688
500 C-Cube Microsystems*............................. 13,563
500 Catalina Marketing Corp.......................... 34,188
400 Comdisco, Inc.................................... 6,750
300 CTS Corp......................................... 13,050
200 Etec Systems, Inc.*.............................. 8,000
700 Gentex Corp.*.................................... 14,000
200 HNC Software..................................... 8,088
300 Hyperion Solutions Corp.*........................ 5,400
600 Inter-Tel, Inc................................... 14,025
300 Kronos, Inc.*.................................... 13,294
200 Medimmune, Inc................................... 19,887
2,000 National Computer Systems, Inc................... 74,000
200 National Instruments Corp.*...................... 6,825
200 Novellus Systems*................................ 9,900
500 Petroleum Geo-Svc ADR*........................... 7,875
200 Sanmina Corp.*................................... 12,500
100 Sapient Corp.*................................... 5,600
200 Transaction Systems Architects*.................. 10,000
200 Uniphase Corp.*.................................. 13,875
400 Verity*.......................................... 10,600
100 Veritas Software Corp.*.......................... 5,994
600 Vitesse Semiconductor Corp.*..................... 27,375
700 Whittman-Hart, Inc.*............................. 19,338
300 Xircom, Inc.*.................................... 10,200
-------------
459,390
TRANSPORTATION & SERVICES -- 1.11%
300 Comair Holdings, Inc............................. 10,125
200 Metzler (The) Group, Inc.*....................... 9,737
-------------
19,862
TOTAL COMMON STOCKS
(Cost $1,308,007)............................................ 1,526,346
-------------
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 13.43%
$ 240,000 UMB Bank, n.a.,
4.35% due 1/04/99
(Collateralized by U.S.
Treasury Notes, 5.875%
due 2/28/99 with a
value of $251,033)
(Cost $240,000).............................. $ 240,000
-------------
TOTAL INVESTMENTS -- 98.88%
(Cost $1,548,007)............................................ 1,766,346
Other assets less liabilities -- 1.12%....................... 19,937
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $8.14 per share; 500,000,000 shares of $.001
par value capital shares authorized; 219,525 shares
outstanding)................................................. $ 1,786,283
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS OWNED AT
DECEMBER 31, 1998, WAS $1,555,378. NET UNREALIZED APPRECIATION FOR FEDERAL
INCOME TAX PURPOSES WAS $210,968, WHICH IS COMPRISED OF UNREALIZED APPRECIATION
OF $249,573 AND UNREALIZED DEPRECIATION OF $38,605.
* NON-INCOME PRODUCING SECURITY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
GROWTH AND
INCOME
STATEMENT OF NET ASSETS
December 31, 1998
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
--------------------------------------------------------------------------
COMMON STOCKS -- 94.15%
BASIC MATERIALS -- 3.52%
500 duPont (E.I.) deNemours & Co..................... $ 26,531
800 Georgia-Pacific Corp............................. 46,850
1,000 Georgia-Pacific Corp. Timber Group............... 23,813
-------------
97,194
CAPITAL GOODS -- 4.64%
1,000 Deere & Co....................................... 33,125
1,000 Emerson Electric Co.............................. 62,563
300 United Technologies Corp......................... 32,625
-------------
128,313
CONSUMER CYCLICAL -- 12.77%
1,000 CBS Corp......................................... 32,750
800 Dow Jones & Company, Inc......................... 38,500
400 Eastman Kodak Co................................. 28,800
400 Ford Motor Co.................................... 23,475
500 General Motors Corp.............................. 35,781
400 May Department Stores Co......................... 24,150
200 Time-Warner, Inc................................. 12,413
600 V.F. Corp........................................ 28,125
900 Wal-Mart Stores, Inc............................. 73,294
1,200 Waste Management, Inc............................ 55,950
-------------
353,238
CONSUMER STAPLES -- 8.72%
600 Bestfoods, Inc................................... 31,950
1,200 ConAgra, Inc..................................... 37,800
400 Fortune Brands, Inc.............................. 12,650
1,000 Heinz (H.J.) Co.................................. 56,625
1,000 Philip Morris Cos................................ 53,500
1,500 Ralston Purina Group............................. 48,562
-------------
241,087
ENERGY -- 9.33%
700 British Petroleum Co............................. 62,737
1,300 Coastal Corp..................................... 45,419
800 Mobil Corp....................................... 69,700
1,500 Occidental Petroleum Corp........................ 25,313
1,100 Total ADR........................................ 54,725
-------------
257,894
FINANCIAL -- 17.07%
200 Aetna, Inc....................................... 15,725
1,000 American General Corp............................ 78,000
800 Banc One Corp.................................... 40,850
500 BankAmerica Corp................................. 30,062
800 Chase Manhattan Corp............................. 54,450
500 Chubb Corp....................................... 32,437
400 Cigna Corp....................................... 30,925
1,000 First Union Corp................................. 60,812
500 Jefferson-Pilot Corp............................. 37,500
700 Morgan Stanley, Dean Witter...................... 49,700
1,200 St. Paul Cos..................................... 41,700
-------------
472,161
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
HEALTHCARE -- 7.31%
1,100 American Home Products........................... $ 61,944
800 Baxter International............................. 51,450
1,300 Columbia HCA/Healthcare.......................... 32,175
1,000 Pharmacia & UpJohn, Inc.......................... 56,625
-------------
202,194
TECHNOLOGY -- 17.60%
1,300 A T & T Corp..................................... 97,825
600 EMC Corp......................................... 51,000
1,200 First Data Corp.................................. 38,025
500 International Business Machines Corp............. 92,375
800 MCI WorldCom, Inc................................ 57,400
1,000 Seagate Technology, Inc.......................... 30,250
800 Sun Microsystems................................. 68,500
600 Texas Instruments................................ 51,338
-------------
486,713
UTILITIES -- 13.19%
800 Alltell Corp..................................... 47,850
1,000 Bell Atlantic Corp............................... 56,812
1,000 Carolina Power & Light........................... 47,063
1,000 Duke Power Co.................................... 64,062
1,500 FirstEnergy Corp................................. 48,844
800 Florida Progress Corp............................ 35,850
1,200 SBC Communications, Inc.......................... 64,350
-------------
364,831
TOTAL COMMON STOCKS
(Cost $2,200,907)............................................. 2,603,625
-------------
CONVERTIBLE PREFERRED STOCKS -- 2.26%
400 Aetna, Inc....................................... 30,425
300 Houston Industries............................... 31,912
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $50,621)................................................ 62,337
-------------
TOTAL INVESTMENTS -- 96.41%
(Cost $2,251,528)............................................. 2,665,962
Other assets less liabilities -- 3.59%........................ 99,367
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $11.53 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 239,836 shares outstanding)....................... $ 2,765,329
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS OWNED AT
DECEMBER 31, 1998, WAS $2,257,306. NET UNREALIZED APPRECIATION FOR FEDERAL
INCOME TAX PURPOSES WAS $408,656, WHICH IS COMPRISED OF UNREALIZED APPRECIATION
OF $476,285 AND UNREALIZED DEPRECIATION OF $67,629.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
BALANCED
STATEMENT OF NET ASSETS
December 31, 1998
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
--------------------------------------------------------------------------
COMMON STOCKS -- 43.13%
BASIC MATERIALS -- 3.17%
3,000 Republic Group, Inc.............................. $ 60,188
2,000 Steel Dynamics, Inc.*............................ 23,500
-------------
83,688
CAPITAL GOODS -- 1.28%
400 Lockheed Martin Corp............................. 33,900
-------------
CONSUMER CYCLICAL -- 10.37%
1,000 Brunswick Corp................................... 24,750
1,000 Carnival Corp.................................... 48,000
500 Dillard's, Inc. Cl. A............................ 14,187
3,000 Elcor Corp....................................... 96,938
1,000 Ethan Allen Interiors, Inc....................... 41,000
2,000 Interface, Inc................................... 18,562
2,000 Kmart Corp.*..................................... 30,625
-------------
274,062
CONSUMER STAPLES -- 1.91%
500 PepsiCo, Inc..................................... 20,469
1,000 Walt Disney Co................................... 30,000
-------------
50,469
ENERGY -- 5.27%
12,500 Frontier Oil Corp.*.............................. 61,719
1,000 McDermott International, Inc..................... 24,687
3,000 Nabors Industries*............................... 40,688
1,950 Ocean Energy, Inc.*.............................. 12,309
-------------
139,403
FINANCIAL -- 4.12%
1,000 Allstate Corp.................................... 38,625
250 American Express Co.............................. 25,563
1,000 Fleet Financial Group, Inc....................... 44,687
-------------
108,875
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
HEALTHCARE -- 2.41%
250 Merck & Company, Inc............................. $ 36,922
500 Quintiles Transnational.......................... 26,688
-------------
63,610
TECHNOLOGY -- 8.75%
1,000 Alcatel Alsthom.................................. 24,437
1,500 Diebold, Inc..................................... 53,531
250 IBM Corp......................................... 46,187
500 Loral Space & Communications Ltd.*............... 26,875
250 Microsoft Corp................................... 34,672
2,000 Scientific Atlantic.............................. 45,625
-------------
231,327
TRANSPORTATION -- 4.77%
500 FDX Corp.*....................................... 44,500
1,000 Kansas City Southern............................. 49,188
1,450 Southwest Airlines Co............................ 32,534
-------------
126,222
UTILITIES -- 1.08%
500 Enron Corp....................................... 28,531
-------------
TOTAL COMMON STOCKS
(Cost $1,090,167)............................................ 1,140,087
-------------
CONVERTIBLE PREFERRED STOCKS -- 13.38%
3,000 Bethlehem Steel.................................. 117,750
2,000 Cyprus Amax Minerals Co.......................... 70,500
2,000 Freeport McMoRan................................. 29,750
4,000 ICO, Inc......................................... 51,000
1,000 Kmart Financing.................................. 57,938
800 Texas Industries, Inc............................ 26,800
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $445,406).............................................. 353,738
-------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
--------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS -- 16.57%
$ 100,000 Eagle Geophysical, Inc.,
10.75% due 7/15/08........................... $ 83,000
50,000 Frontier Oil Corp.,
9.125% due 2/15/06........................... 46,250
40,000 Kmart Funding, Series G,
9.44% due 12/01/14........................... 43,230
75,000 Kaiser Aluminum & Chemical Corp., 12.75% due
2/01/03...................................... 73,875
50,000 Specialty Retailers,
9.00% due 7/15/07............................ 40,750
125,000 United Refining Co.,
10.75% due 6/15/07........................... 84,375
100,000 Wiser Oil Co., 9.5% due 5/15/07.................. 66,500
-------------
TOTAL CORPORATE BONDS
(Cost $532,694).............................................. 437,980
-------------
CONVERTIBLE CORPORATE BONDS -- 20.73%
55,000 Allwaste, Inc.,
7.25% due 6/01/14............................ 4,056
50,000 Argosy Gaming,
12.00% due 6/01/01........................... 49,750
125,000 HMT Technology,
5.75% due 1/15/04............................ 100,156
125,000 Integrated Device Technologies, 5.50% due
6/01/02...................................... 86,250
100,000 Intervac, Inc.,
6.50% due 3/01/04............................ 61,000
125,000 Key Energy,
5.00% due 9/15/04............................ 54,375
101,000 Lomak Petroleum,
6.00% due 2/01/07............................ 57,065
50,000 Micron Technology,
7.00% due 7/01/04............................ 53,688
50,000 National Semiconductor 144A,
6.50% due 10/01/02........................... 44,125
40,000 VLSI Technology, Inc.,
8.25% due 10/01/05........................... 37,700
-------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $725,456).............................................. 548,165
-------------
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.54%
$ 120,000 UMB Bank, n.a.,
4.35% due 1/04/99
(Collateralized by U.S.
Treasury Notes, 5.875%
due 2/28/99 with a
value of $125,516)
(Cost $120,000).............................. $ 120,000
-------------
TOTAL INVESTMENTS -- 98.35%
(Cost $2,913,723)............................................ 2,599,970
Other assets less liabilities -- 1.65%....................... 43,587
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $8.88 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 297,788 shares outstanding)...................... $ 2,643,557
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS OWNED AT
DECEMBER 31, 1998, WAS $2,913,723. NET UNREALIZED APPRECIATION FOR FEDERAL
INCOME TAX PURPOSES WAS $313,753, WHICH IS COMPRISED OF UNREALIZED APPRECIATION
OF $167,631 AND UNREALIZED DEPRECIATION OF $481,384.
* NON-INCOME PRODUCING SECURITY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
INTERMEDIATE
FIXED INCOME
STATEMENT OF NET ASSETS
December 31, 1998
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
--------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 0.79%
500 Equity Office Properties
(Cost $25,000).............................................. $ 19,063
-------------
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
CORPORATE BONDS -- 46.77%
$ 10,000 American Standard,
7.125% due 2/15/03........................... 10,061
25,000 Aramark Services,
6.75% due 8/01/04............................ 25,240
25,000 Bank of Boston Home,
6.140% due 6/25/13........................... 24,851
25,000 Blount, Inc.,
7.00% due 6/15/05............................ 25,008
50,000 Bradley Operating LP,
7.00% due 11/15/04........................... 47,490
50,000 Conseco Financial, nts.,
6.80% due 6/15/05............................ 46,265
75,000 Crescent Real Estate,
7.50% due 9/15/07............................ 68,777
50,000 Criimi Mae, Inc.,
9.125% due 12/01/02.......................... 31,500
15,000 CSX,
6.25% due 10/15/08........................... 15,207
25,000 Discover Card,
5.60% due 5/15/06............................ 25,094
25,000 First Security,
5.875% due 11/01/03.......................... 24,982
25,000 Flag Ltd.,
8.25% due 1/30/08............................ 24,687
25,000 Fred Meyer,
7.45% due 3/01/08............................ 27,011
15,000 GS Escrow Corp.,
7.00% due 8/01/03............................ 14,794
30,000 GS Escrow Corp.,
7.125% due 8/01/05........................... 29,562
25,000 Homeside Lending,
6.75% due 8/01/04............................ 25,730
25,000 IMC Global, nts.,
7.625% due 11/01/05.......................... 25,617
50,000 Lehman Brothers, med. term nts.,
6.625% due 12/27/02.......................... 50,070
50,000 MMI Cap Trust, nts.,
7.625% due 12/15/27.......................... 49,223
25,000 Morgan Stanley Capital,
6.52% due 1/15/08............................ 26,095
25,000 National Westminster Bank,
7.75% due 4/29/49............................ 26,700
25,000 News America Holdings,
7.75% due 12/1/45............................ 26,639
25,000 North Fork Cap Trust,
8.00% due 12/15/27........................... 25,569
25,000 NVR, Inc., sr. nts.,
8.00% due 6/01/05............................ 24,812
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
20,000 Orion Cap Trust,
7.701% due 4/15/28........................... $ 17,928
25,000 Panama, 144A nts.,
7.875% due 2/13/02........................... 23,875
25,000 Petro-Canada,
7.00% due 11/15/28........................... 24,751
25,000 Qwest Communications,
7.50% due 11/01/08........................... 25,937
25,000 Reliastar Financial,
6.50% due 11/15/08........................... 25,453
75,000 Simon Debartolo, med. term nts.,
7.125% due 6/24/05........................... 76,294
15,000 Smithfield Foods, Inc.,
7.625% due 2/15/08........................... 15,150
25,000 Southland Corp., deb. nts.,
4.50% due 6/15/04............................ 21,125
50,000 Tenet Healthcare Corp.,
8.00% due 1/15/05............................ 51,808
25,000 Time Warner, Inc., nts.,
6.625% due 5/15/29........................... 25,444
25,000 Tricon Global Restaurants,
7.45% due 5/15/05............................ 25,800
50,000 UPM-Kymmene Corp., nts.,
7.45% due 11/26/27........................... 47,558
25,000 Westinghouse Credit,
8.875% due 6/14/14........................... 27,625
-------------
TOTAL CORPORATE BONDS
(Cost $1,157,513)........................................... 1,129,732
-------------
GOVERNMENT SPONSORED -- 31.46%
Federal Home Loan Mortgage Corp.
25,000 5.75% due 7/15/03............................ 25,644
126,369 6.00% due 4/01/11............................ 127,120
22,326 7.50% due 5/01/28............................ 22,949
32,107 8.50% due 8/01/28............................ 33,606
23,554 7.50% due 11/01/28........................... 24,187
25,000 Federal National Mortgage Assn.
6.00% due 5/15/08............................ 26,390
Government National Mortgage Assn.
16,513 8.00% due 11/15/17........................... 17,174
42,277 9.00% due 12/15/17........................... 45,408
48,375 8.00% due 7/15/26............................ 50,280
36,207 8.00% due 8/15/26............................ 37,633
33,904 8.00% due 9/15/26............................ 35,239
25,000 8.00% due 10/15/26........................... 25,985
39,965 8.00% due 11/15/26........................... 41,538
20,591 7.50% due 6/15/27............................ 21,228
22,476 8.00% due 7/15/27............................ 23,361
197,548 7.00% due 7/15/28............................ 202,179
-------------
TOTAL GOVERNMENT SPONSORED
(Cost $775,724)............................................. 759,921
-------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
--------------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT SECURITIES -- 10.49%
U.S. Treasury Notes
50,000 5.875% due 11/15/99.......................... $ 50,531
50,000 6.625% due 4/30/02........................... 52,922
25,000 6.625% due 5/15/07........................... 28,125
U.S. Treasury Bonds
65,000 6.625% due 2/15/27........................... 76,903
20,480 3.625% due 7/15/02........................... 20,346
U.S. Treasury Strip
75,000 0% due 2/15/19............................... 24,598
-------------
TOTAL U.S. GOVERNMENT SECURITIES
(Cost $253,345)............................................. 253,425
-------------
COLLATERAL MORTGAGE OBLIGATIONS -- 4.96%
25,000 GMAC Mtg. Oakwood
Mortgage Inv.,
6.853% due 9/15/06........................... 26,408
25,000 Greentree,
6.94% due 12/01/27........................... 24,986
25,000 Greentree,
7.18% due 2/01/08............................ 23,283
25,000 Greentree,
7.14% due 2/01/21............................ 23,445
25,000 Oakwood Mortgage Inv.,
7.75% due 4/15/28............................ 21,742
-------------
TOTAL COLLATERAL MORTGAGE OBLIGATIONS
(Cost $126,538).............................................
119,864
-------------
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.36%
$ 57,000 State Street Bank and Trust Co.,
3.50% due 1/04/99
(Collateralized by U.S.
Treasury Notes, 6.25%
due 8/31/02 with a
value of $58,994)
(Cost $57,000)............................... $ 57,000
-------------
TOTAL INVESTMENTS -- 96.84%
(Cost $2,375,120)........................................... 2,339,005
Other assets less liabilities -- 3.16%...................... 76,425
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $9.95 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 242,653 shares outstanding)..................... $ 2,415,430
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS
OWNED AT DECEMBER 31, 1998, WAS $2,375,337. NET UNREALIZED
DEPRECIATION FOR FEDERAL INCOME TAX PURPOSES WAS $36,332, WHICH
IS COMPRISED OF UNREALIZED APPRECIATION OF $17,001 AND
UNREALIZED DEPRECIATION OF $53,333.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
GLOBAL FIXED
INCOME
STATEMENT OF NET ASSETS
December 31, 1998
<TABLE>
<CAPTION>
<C> <S> <C>
FACE
AMOUNT* DESCRIPTION MARKET VALUE
--------------------------------------------------------------------------
CORPORATE BONDS -- 49.61%
DENMARK -- 2.33%
21,000 Denmark Realkredit, 8.00% due 10/01/26........... $ 3,397
555,000 Denmark Unicredit, 6.00% due 10/01/29............ 85,095
125,000 Denmark NYCredit, 5.00% due 10/01/29............. 18,364
143,000 Danske Kredit, 5.00% due 10/01/29................ 20,971
-------------
127,827
GERMANY -- 1.02%
90,000 Depfa Bank, 4.75% due 7/15/08.................... 56,083
-------------
JAPAN -- 1.66%
7,000,000 IBRD Global, 5.25% due 3/20/02................... 70,165
2,000,000 IBRD Global, 4.75% due 12/20/04.................. 20,712
-------------
90,877
UNITED KINGDOM -- 12.64%
100,000 Alliance & Leic, 8.75% due 12/07/06.............. 192,564
50,000 Birmghm Mdshre Bld Soc, 9.125% due 1/05/06....... 97,733
55,000 European Investment Bank, 7.625% due 12/07/06.... 105,511
30,000 IBRD, 6.875% due 7/14/00......................... 50,683
50,000 Northern Rock, nts., 9.375% due 10/17/21......... 116,855
50,000 P & O Steam Nav, deb. nts., 11.50% due 7/03/14... 129,499
-------------
692,845
UNITED STATES -- 31.96%
10,000 American Standard, 7.125% due 2/15/03............ 10,061
25,000 Aramark Services, 6.75% due 8/01/04.............. 25,240
50,000 Bradley Operating LP, 7.00% due 11/15/04......... 47,489
25,000 CSC Holdings, Inc., 7.25% due 7/15/08............ 25,107
25,000 CSX, 6.25% due 10/15/08.......................... 25,344
25,000 Canada, 5.25% due 11/05/08....................... 25,115
50,000 City National Corp., 6.375% due 1/15/08.......... 50,769
25,000 Coastal Corp., 7.42% due 2/15/37................. 26,025
50,000 Conseco Financial Notes, 6.80% due 6/15/05....... 46,265
75,000 Crescent Real Estate, 7.50% due 9/15/07.......... 68,777
50,000 Criimi Mae Inc., 9.125% due 12/01/02............. 31,500
25,000 Flag Ltd., 8.25% due 1/30/08..................... 24,688
100,000 Fuji Bank, 9.87% due 12/31/49.................... 73,118
15,000 GS Escrow Corp., 7.00% due 8/01/03............... 14,794
85,000 GS Escrow Corp., 7.125% due 8/01/05.............. 83,760
25,000 Homeside Lending, 6.75% due 8/01/04.............. 25,730
<CAPTION>
FACE
AMOUNT* DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
25,000 IMC Global, 7.625% due 11/01/05.................. $ 25,401
10,000 Inter Amer Dev Bank, 6.375% due 8/01/00.......... 10,250
150,000 Inter Amer Dev Bank, 5.75% due 2/26/08........... 154,988
50,000 Lehman Brothers, med. term nts., 6.625% due
12/27/02..................................... 50,070
25,000 Lenfest Communications, 10.50% due 6/15/06....... 29,375
50,000 MMI Cap Trust, nts., 7.625% due 12/15/27......... 49,223
50,000 National Westminster Bank, 7.75% due 4/29/49..... 53,400
25,000 News Amer Holdings, 7.75% due 12/01/45........... 26,639
25,000 Niagra Mohawk Power, 7.75% due 10/01/08.......... 27,471
25,000 NVR, Inc., 8.00% due 6/01/05..................... 24,812
25,000 Panama, 144A nts., 7.875% due 2/13/02............ 23,875
25,000 Panamsat Corp., 6.00% due 1/15/03................ 24,825
25,000 Panamsat Corp., 6.125% due 1/15/05............... 24,757
25,000 Petro-Canada, 7.00% due 11/15/28................. 24,751
25,000 Qwest Communications, 0% due 2/01/08............. 19,000
25,000 Qwest Communications, 7.50% due 11/01/08......... 25,937
25,000 Reliastar Financial, 6.50% due 11/15/08.......... 25,453
25,000 Safeway Stores, 6.05% due 11/15/03............... 25,112
75,000 Simon Debartolo, med. term nts., 7.125% due
6/24/05...................................... 76,294
50,000 Smithfield Foods, Inc., 7.625% due 2/15/08....... 50,500
25,000 Star Bank Corp., 5.875% due 11/01/03............. 25,157
100,000 Telekomikacja Polska, 7.75% due 12/10/08......... 99,240
50,000 Tenet Healthcare Corp., 8.00% due 1/15/05........ 51,808
50,000 Time Warner, Inc., nts., 6.625% due 5/15/29...... 50,887
25,000 Tricon Global Rest, 7.45% due 5/15/05............ 25,800
25,000 Tricon Global Rest, 7.65% due 5/15/08............ 26,186
25,000 Union Planters, 6.50% due 3/15/08................ 25,482
50,000 UPM-Kymmene Corp., nts., 7.45% due 11/26/27...... 47,558
25,000 US Filter Corp., 6.50% due 5/15/03............... 24,407
-------------
1,752,440
TOTAL CORPORATE BONDS
(Cost $2,753,550)............................................... 2,720,072
-------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT* DESCRIPTION MARKET VALUE
--------------------------------------------------------------------------
<C> <S> <C>
GOVERNMENT BONDS -- 38.27%
AUSTRALIA -- 2.88%
90,000 Australian Govt., 6.25% due 4/14/04.............. $ 157,638
-------------
DENMARK -- 3.55%
1,075,000 Denmark Govt., 7.00% due 12/15/04................ 194,739
-------------
FRANCE -- 0.97%
250,000 France OAT,**
6.00% due 10/25/25........................... 53,343
-------------
GERMANY -- 13.35%
275,000 Bundesobl, 5.875% due 5/15/00.................... 171,083
80,000 Bundesobl, 6.50% due 3/15/00..................... 49,919
150,000 Bundesobl, 5.75% due 8/22/00..................... 93,742
215,000 Deutschland Republic, 8.25% due 9/20/01.......... 145,636
70,000 Deutschland Republic, 8.375% due 5/21/01......... 46,962
25,000 Deutschland Republic, 9.00% due 1/22/01.......... 16,729
150,000 German Unity Fund, 8.50% due 2/20/01............. 99,742
150,000 Treuhandanstalt, 7.50% due 9/09/04............... 108,171
-------------
731,984
ITALY -- 0.57%
50,000,000 BTPS, 6.00% due 5/15/00**........................ 31,401
-------------
JAPAN -- 6.95%
5,000,000 Italy Euroyen, 5.125% due 7/29/03................ 51,443
7,000,000 Italy Euroyen, nts., 3.75% due 6/08/05........... 69,322
3,000,000 South Africa, 3.35% due 6/17/04.................. 24,653
13,000,000 Spanish Kingdom Euroyen, 5.75% due 3/23/02....... 131,890
10,000,000 Spanish Kingdom Euroyen, 4.75% due 3/14/05....... 103,458
-------------
380,766
NETHERLANDS -- 0.31%
30,000 Netherland Govt., 9.00% due 5/15/00.............. 17,164
-------------
NEW ZEALAND -- 2.97%
95,000 New Zealand Govt., 7.00% due 7/15/09............. 56,134
90,000 New Zealand Govt., 8.00% due 4/15/04............. 52,987
90,000 New Zealand Govt., 10.00% due 3/15/02............ 53,841
-------------
162,962
SWEDEN -- 3.08%
1,300,000 Sweden Govt., 5.00% due 1/15/04.................. 168,775
-------------
<CAPTION>
FACE
AMOUNT* DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
UNITED KINGDOM -- 0.93%
25,000 UK Gilt Treasury, deb. nts., 10.00% due
9/08/03...................................... $ 50,985
-------------
UNITED STATES -- 2.71%
85,000 Federal Nat'l. Mtg. Assn., 6.875% due 6/07/02.... 148,351
-------------
TOTAL GOVERNMENT BONDS
(Cost $1,911,259)............................................... 2,098,108
-------------
U.S. GOVERNMENT SPONSORED -- 7.20%
50,000 Federal Home Loan Mortgage Corp. Discount Notes,
4.83% due 1/06/99............................ 49,967
25,000 Federal Home Loan Mortgage Corp., 5.75% due
7/15/03...................................... 25,644
125,289 Federal Home Loan Mortgage Corp., 6.00% due
3/01/11...................................... 126,033
137,914 Federal National Mortgage Assn., 7.00% due
11/01/27..................................... 140,896
50,499 Government National Mortgage Assn., 8.00% due
12/15/27..................................... 52,487
-------------
TOTAL U.S. GOVERNMENT SPONSORED
(Cost $389,521)................................................. 395,027
-------------
U.S. GOVERNMENT SECURITIES -- 3.31%
U.S. Treasury Notes
90,000 6.625% due 4/30/02........................... 95,259
U.S. Treasury Bonds
25,878 3.375% due 1/15/07........................... 24,948
61,441 3.625% due 7/15/02........................... 61,038
-------------
TOTAL U.S. GOVERNMENT SECURITIES
(Cost $181,568)................................................. 181,245
-------------
U.S. GOVERNMENT AGENCY -- 0.46%
25,000 Tennessee Valley Authority, 5.375% due 11/13/08
(Cost $24,895).................................................. 25,179
-------------
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 0.35%
500 Equity Office Properties
(Cost $25,000).................................................. 19,063
-------------
</TABLE>
23
<PAGE>
GLOBAL FIXED
INCOME (CONTINUED)
STATEMENT OF NET ASSETS
December 31, 1998
<TABLE>
<CAPTION>
SHARES EXPIRATION DATE/EXERCISE PRICE MARKET VALUE
--------------------------------------------------------------------------
<C> <S> <C>
CALL OPTIONS PURCHASED -- 0.91%
Brazilian Real Cruzeiro
100,000 Sept 99 / 1.350.............................. $ 10,950
French Franc
400,000 Aug 99 / 106.660............................. 2,168
625,000 Oct 99 / 108.150............................. 2,739
German Deutschmark
265,000 Oct 99 / 103.350............................. 1,353
100,000 Dec 99 / 110.760............................. 589
100,000 Feb 99 / 109.620............................. 2,294
175,000 Oct 99 / 115.100............................. 2,512
100,000 Apr 99 / 96.120.............................. 2,763
175,000 Nov 99 / 104.900............................. 2,155
175,000 Oct 99 / 112.880............................. 1,955
105,000 Oct 99 / 112.660............................. 1,242
Japanese Yen
75,000 Sept 99 / 138.000............................ 733
55,000 Oct 99 / 125.000............................. 1,303
100,000 Nov 99 / 127.000............................. 2,250
6,500,000 Apr 99 / 120.060............................. 6
50,000 Jun 99 / 150.000............................. 80
125,000 Jun 99 / 155.000............................. 138
50,000 Nov 99 / 128.000............................. 1,090
125,000 Dec 99 / 116.950............................. 5,437
United States Dollar
50,000 Jan 99 / 110.429............................. 907
55,000 Apr 99 / 110.000............................. 258
100,000 Apr 99 / 108.190............................. 984
50,000 May 99 / 113.437............................. 1,359
100,000 Feb 99 / 111.031............................. 1,813
100,000 Feb 99 / 104.391............................. 2,031
50,000 Mar 99 / 105.891............................. 719
50,000 Mar 99 / 113.390............................. 141
-------------
TOTAL CALL OPTIONS PURCHASED
(Cost $76,582).................................................. 49,969
-------------
PUT OPTIONS PURCHASED -- 0.18%
Italian Lira
90,000,000 Jul 07 / 105.290............................. 10
182,500,000 Jul 07 / 107.690............................. 83
90,000,000 Feb 00 / 105.490............................. 12
Japanese Yen
14,000,000 Jan 99 / 99.910.............................. 814
180,000 Apr 99 / 73.500.............................. 76
21,500,000 Jun 99 / 110.000............................. 8,412
United States Dollar
105,000 Aug 99 / 150.000............................. 478
50,000 Nov 99 / 99.258.............................. 16
-------------
TOTAL PUT OPTIONS PURCHASED
(Cost $17,769).................................................. 9,901
-------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
FACE
AMOUNT DESCRIPTION MARKET VALUE
--------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.91%
$ 50,000 State Street Bank and Trust Co.,
3.50% due 1/04/99
(Collateralized by U.S.
Treasury Notes, 13.25%
due 5/15/14 with a
value of $58,547)
(Cost $50,000)............................... $ 50,000
-------------
TOTAL INVESTMENTS -- 101.20%
(Cost $5,430,144)........................................... 5,548,564
Other assets less liabilities -- (1.20%).................... (65,948)
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $9.92 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 552,459 shares outstanding)..................... $ 5,482,616
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS OWNED AT
DECEMBER 31, 1998, WAS $5,433,607. NET UNREALIZED APPRECIATION FOR FEDERAL
INCOME TAX PURPOSES WAS $114,957, WHICH IS COMPRISED OF UNREALIZED APPRECIATION
OF $245,570 AND UNREALIZED DEPRECIATION OF $130,613.
* FACE AMOUNT OF FOREIGN BOND IS REFLECTED IN LOCAL CURRENCY WHILE MARKET
VALUE IS REFLECTED IN U.S. DOLLARS.
** SECURITY IS HELD IN CONNECTION WITH OPEN COVERED CALL OPTIONS AND PUT
OPTIONS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
MONEY
MARKET
STATEMENT OF NET ASSETS
December 31, 1998
<TABLE>
<CAPTION>
<C> <S> <C>
FACE
AMOUNT DESCRIPTION MARKET VALUE
--------------------------------------------------------------------------
GOVERNMENT SPONSORED -- 79.21%
Federal Farm Credit Banks
Discount Notes
$ 130,000 4.00% due 2/18/99............................ $ 129,145
Federal Home Loan Mortgage Corp. Discount Notes
205,000 5.15% due 1/11/99............................ 204,714
40,000 5.24% due 1/15/99............................ 39,919
140,000 5.01% due 1/28/99............................ 139,474
150,000 5.04% due 2/03/99............................ 149,307
140,000 4.88% due 4/01/99............................ 138,292
Federal National Mortgage Assn. Discount Notes
11,000 5.08% due 1/15/99............................ 10,978
95,000 5.05% due 2/05/99............................ 94,534
Student Loan Marketing Corp. Discount Notes
100,000 5.80% due 1/04/99............................ 99,952
-------------
TOTAL GOVERNMENT SPONSORED
(Cost $1,006,315)............................................ 1,006,315
-------------
U.S. GOVERNMENT SECURITIES -- 20.41%
U.S. Treasury Bills
260,000 4.40% due 1/21/99
(Cost $259,364).............................. 259,364
-------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.40%
<C> <S> <C>
5,000 State Street Bank and Trust Co.,
3.50% due 1/04/99 (Collateralized by U.S.
Treasury Notes, 6.25%
due 2/15/03 with a
value of $5,406)
(Cost $5,000)................................ $ 5,000
-------------
TOTAL INVESTMENTS -- 100.02%
(Cost $1,270,679).......................................... 1,270,679
Other assets less liabilities -- (0.02%)................... (232)
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $1.00 per share; 500,000,000 shares of $.001
par value capital shares authorized; 1,270,447 shares
outstanding)............................................... $ 1,270,447
-------------
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
STATEMENTS OF ASSETS
AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID CAP
VALUE GROWTH EQUITY
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value (identified
cost $3,482,092, $2,159,964,
$2,152,066, $1,548,007, $2,251,528,
$2,913,723, $2,375,120 $5,430,144,
and $1,270,679, respectively)...... $ 3,464,309 $ 2,984,731 $ 2,458,201
Cash................................. -- 9,852 306
Dividends receivable................. 2,132 869 4,002
Interest receivable.................. -- -- --
Forward foreign currency contracts... -- -- --
Receivables for investments sold..... -- -- 6,472
Other receivables.................... -- -- --
----------------- ----------------- -----------------
Total assets................... 3,466,441 2,995,452 2,468,981
----------------- ----------------- -----------------
LIABILITIES AND NET ASSETS:
Cash overdraft....................... -- -- --
Fees payable......................... 2,787 2,309 1,367
Options written...................... -- -- --
Forward foreign currency contracts... -- -- --
Payable for investments purchased.... 237,971 -- --
----------------- ----------------- -----------------
Total liabilities.............. 240,758 2,309 1,367
----------------- ----------------- -----------------
NET ASSETS............................. $ 3,225,683 $ 2,993,143 $ 2,467,614
----------------- ----------------- -----------------
----------------- ----------------- -----------------
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in
capital)........................... $ 3,254,395 $ 2,285,699 $ 2,219,426
Accumulated undistributed net
investment income.................. -- -- 2,305
Accumulated undistributed net
realized gain (loss) on sale of
investments and foreign currency
transactions....................... (10,929) (117,323) (60,252)
Net unrealized appreciation
(depreciation) in value of
investments and translation of
assets and liabilities in foreign
currency........................... (17,783) 824,767 306,135
----------------- ----------------- -----------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES............................... $ 3,225,683 $ 2,993,143 $ 2,467,614
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Capital shares, $.001 par value
Authorized........................... 500,000,000 500,000,000 500,000,000
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Outstanding.......................... 326,573 224,852 222,014
----------------- ----------------- -----------------
----------------- ----------------- -----------------
NET ASSET VALUE PER SHARE.............. $ 9.88 $ 13.31 $ 11.11
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
<TABLE>
<CAPTION>
SMALL CAP GROWTH INTERMEDIATE GLOBAL MONEY
EQUITY & INCOME BALANCED FIXED INCOME FIXED INCOME MARKET
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value (identified
cost $3,482,092, $2,159,964,
$2,152,066, $1,548,007, $2,251,528,
$2,913,723, $2,375,120 $5,430,144,
and $1,270,679, respectively)...... $ 1,766,346 $ 2,665,962 $ 2,599,970 $ 2,339,005 $ 5,548,564 $ 1,270,679
Cash................................. 26,197 88,983 5,109 48,789 -- 250
Dividends receivable................. 356 5,936 5,193 -- -- --
Interest receivable.................. -- -- 35,452 27,636 115,929 --
Forward foreign currency contracts... -- -- -- -- 39,808 --
Receivables for investments sold..... 8,900 6,704 -- -- -- --
Other receivables.................... -- -- -- -- 5,355 --
------------ ------------ ------------ ------------ ------------ ------------
Total assets................... 1,801,799 2,767,585 2,645,724 2,415,430 5,709,656 1,270,929
------------ ------------ ------------ ------------ ------------ ------------
LIABILITIES AND NET ASSETS:
Cash overdraft....................... -- -- -- -- 9,055 --
Fees payable......................... 1,644 2,256 2,167 -- -- 482
Options written...................... -- -- -- -- 110,181 --
Forward foreign currency contracts... -- -- -- -- 107,804 --
Payable for investments purchased.... 13,872 -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities.............. 15,516 2,256 2,167 -- 227,040 482
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS............................. $ 1,786,283 $ 2,765,329 $ 2,643,557 $ 2,415,430 $ 5,482,616 $ 1,270,447
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in
capital)........................... $ 2,147,065 $ 2,421,243 $ 2,949,636 $ 2,434,480 $ 5,402,276 $ 1,270,447
Accumulated undistributed net
investment income.................. -- 1,870 1,233 3,371 70,592 --
Accumulated undistributed net
realized gain (loss) on sale of
investments and foreign currency
transactions....................... (579,121) (72,218) 6,441 13,694 (3,461) --
Net unrealized appreciation
(depreciation) in value of
investments and translation of
assets and liabilities in foreign
currency........................... 218,339 414,434 (313,753) (36,115) 13,209 --
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES............................... $ 1,786,283 $ 2,765,329 $ 2,643,557 $ 2,415,430 $ 5,482,616 $ 1,270,447
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Capital shares, $.001 par value
Authorized........................... 500,000,000 500,000,000 500,000,000 500,000,000 500,000,000 500,000,000
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Outstanding.......................... 219,525 239,836 297,788 242,653 552,459 1,270,447
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
NET ASSET VALUE PER SHARE.............. $ 8.14 $ 11.53 $ 8.88 $ 9.95 $ 9.92 $ 1.00
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
27
<PAGE>
STATEMENTS
OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID CAP
VALUE GROWTH EQUITY
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends (net of foreign taxes
withheld)........................ $ 63,470 $ 16,731 $ 27,360
Interest........................... 3,396 4,729 1,597
----------------- ----------------- -----------------
66,866 21,460 28,957
----------------- ----------------- -----------------
Expenses (Note 2):
Management fees.................... 23,015 19,520 18,163
Custody and accounting fees........ 2,504 2,248 16,253
Professional fees.................. 12,988 12,988 12,935
Directors fees..................... 3,207 3,207 3,207
Insurance expense.................. 1,200 1,200 1,200
Contractholder reports............. 1,150 1,150 1,150
Other expenses..................... 106 104 1,040
----------------- ----------------- -----------------
Total expenses before
reimbursement.................. 44,170 40,417 53,948
Less: expense reimbursement...... (18,278) (18,457) (33,515)
----------------- ----------------- -----------------
Net expenses..................... 25,892 21,960 20,433
----------------- ----------------- -----------------
Net investment income (loss)..... 40,974 (500) 8,524
----------------- ----------------- -----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, OPTIONS WRITTEN AND FOREIGN CURRENCY:
Realized gain (loss) from:
Investment transactions............ 38,317 (117,323) (48,813)
Foreign currency transactions...... -- -- --
Option contracts written........... -- -- --
----------------- ----------------- -----------------
Net realized gain (loss) from
investments, options written
and foreign currency
transactions................... 38,317 (117,323) (48,813)
----------------- ----------------- -----------------
Change in unrealized appreciation
(depreciation) during the period
from:
Investments........................ 60,044 684,602 213,717
Translation of assets and
liabilities in foreign
currencies....................... -- -- --
----------------- ----------------- -----------------
Net unrealized appreciation
(depreciation)................... 60,044 684,602 213,717
----------------- ----------------- -----------------
Net gain (loss) on investments
and foreign currencies......... 98,361 567,279 164,904
----------------- ----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS...... $ 139,335 $ 566,779 $ 173,428
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
<TABLE>
<CAPTION>
GLOBAL
SMALL CAP GROWTH INTERMEDIATE FIXED MONEY
EQUITY & INCOME BALANCED FIXED INCOME INCOME MARKET
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends (net of foreign taxes
withheld)........................ $ 5,406 $ 53,976 $ 43,073 $ 966 $ -- $ --
Interest........................... 4,261 -- 113,771 147,189 338,408 58,179
--------- --------- --------- ------------ --------- ---------
9,667 53,976 156,844 148,155 338,408 58,179
--------- --------- --------- ------------ --------- ---------
Expenses (Note 2):
Management fees.................... 17,477 20,277 21,284 13,555 39,623 4,280
Custody and accounting fees........ 5,852 5,229 2,358 11,422 17,368 7,749
Professional fees.................. 12,988 13,131 12,988 13,410 13,687 12,459
Directors fees..................... 3,207 3,207 3,207 3,207 3,207 3,207
Insurance expense.................. 1,200 1,200 1,200 1,200 1,200 1,200
Contractholder reports............. 1,150 1,150 1,150 1,150 1,150 1,150
Other expenses..................... 103 105 104 582 1,565 871
--------- --------- --------- ------------ --------- ---------
Total expenses before
reimbursement.................. 41,977 44,299 42,291 44,526 77,800 30,916
Less: expense reimbursement...... (22,660) (21,487) (18,347) (26,453) (24,925) (25,565)
--------- --------- --------- ------------ --------- ---------
Net expenses..................... 19,317 22,812 23,944 18,073 52,875 5,351
--------- --------- --------- ------------ --------- ---------
Net investment income (loss)..... (9,650) 31,164 132,900 130,082 285,533 52,828
--------- --------- --------- ------------ --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, OPTIONS WRITTEN AND FOREIGN CURRENCY:
Realized gain (loss) from:
Investment transactions............ (573,464) (72,218) 6,441 29,696 126,080 --
Foreign currency transactions...... -- -- -- -- (10,409) --
Option contracts written........... -- -- -- -- 20,657 --
--------- --------- --------- ------------ --------- ---------
Net realized gain (loss) from
investments, options written
and foreign currency
transactions................... (573,464) (72,218) 6,441 29,696 136,328 --
--------- --------- --------- ------------ --------- ---------
Change in unrealized appreciation
(depreciation) during the period
from:
Investments........................ 269,804 332,012 (303,573) (47,397) (56,149) --
Translation of assets and
liabilities in foreign
currencies....................... -- -- -- -- 3,992 --
--------- --------- --------- ------------ --------- ---------
Net unrealized appreciation
(depreciation)................... 269,804 332,012 (303,573) (47,397) (52,157) --
--------- --------- --------- ------------ --------- ---------
Net gain (loss) on investments
and foreign currencies......... (303,660) 259,794 (297,132) (17,701) 84,171 --
--------- --------- --------- ------------ --------- ---------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS...... $(313,310) $ 290,958 $(164,232) $ 112,381 $ 369,704 $ 52,828
--------- --------- --------- ------------ --------- ---------
--------- --------- --------- ------------ --------- ---------
</TABLE>
29
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
<TABLE>
<CAPTION>
LARGE CAP VALUE
----------------------------
FOR THE PERIOD
FOR THE FROM 11/13/97
YEAR ENDED (COMMENCEMENT)
12/31/98 TO 12/31/97
<S> <C> <C>
- ---------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income................ $ 40,974 $ 7,316
Net realized gain (loss) from
investments, options and foreign
currency transactions.............. 38,317 --
Net unrealized appreciation
(depreciation) of investments and
translation of assets and
liabilities in foreign currency
during the period.................. 60,044 (77,827)
----------- ---------------
Net increase (decrease) in net
assets resulting from
operations....................... 139,335 (70,511)
DISTRIBUTIONS TO CONTRACTHOLDERS FROM:**
Net investment income................ (44,421) (6,280)
Net realized gain from investment
transactions....................... (47,594) --
----------- ---------------
Total distributions to
contractholders.................. (92,015) (6,280)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold............ 650,325 2,503,501
Net asset value of shares issued for
reinvestment of distributions...... 92,015 6,280
Cost of shares repurchased........... (8,087) --
----------- ---------------
Net increase from capital share
transactions..................... 734,253 2,509,781
----------- ---------------
Total increase (decrease) in net
assets......................... 781,573 2,432,990
NET ASSETS:
Beginning of period.................. 2,444,110 11,120
----------- ---------------
End of period........................ $ 3,225,683 $ 2,444,110
----------- ---------------
----------- ---------------
Undistributed net investment income
at end of period................... $ -- $ 1,036
----------- ---------------
----------- ---------------
*Shares issued and repurchased:
Number of shares sold................ 65,647 250,363
Number of shares issued for
reinvestment of distributions...... 9,555 669
Number of shares repurchased......... (773) --
----------- ---------------
Net increase....................... 74,429 251,032
----------- ---------------
----------- ---------------
**Distributions to contractholders:
Income dividends per share........... $ 0.14 $ 0.025
Capital gain distributions per
share.............................. $ 0.15 $ --
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
<TABLE>
<CAPTION>
SMALL CAP
LARGE CAP GROWTH MID CAP EQUITY EQUITY
------------------------------- ------------------------------- -------------
FOR THE PERIOD FOR THE PERIOD
FOR THE FROM 11/13/97 FOR THE FROM 11/13/97 FOR THE
YEAR ENDED (COMMENCEMENT) YEAR ENDED (COMMENCEMENT) YEAR ENDED
12/31/98 TO 12/31/97 12/31/98 TO 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income................ $ (500) $ 917 $ 8,524 $ 3,738 $ (9,650)
Net realized gain (loss) from
investments, options and foreign
currency transactions.............. (117,323) 799 (48,813) 6,139 (573,464)
Net unrealized appreciation
(depreciation) of investments and
translation of assets and
liabilities in foreign currency
during the period.................. 684,602 140,165 213,717 92,418 269,804
------------- --------------- ------------- --------------- -------------
Net increase (decrease) in net
assets resulting from
operations....................... 566,779 141,881 173,428 102,295 (313,310)
DISTRIBUTIONS TO CONTRACTHOLDERS FROM:**
Net investment income................ (923) -- (6,592) (3,365) (768)
Net realized gain from investment
transactions....................... (811) -- (17,578) -- --
------------- --------------- ------------- --------------- -------------
Total distributions to
contractholders.................. (1,734) -- (24,170) (3,365) (768)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold............ 275,032 2,003,500 180,028 2,005,500 140,968
Net asset value of shares issued for
reinvestment of distributions...... 1,734 -- 24,169 3,365 768
Cost of shares repurchased........... (5,169) -- (4,756) -- (1,121)
------------- --------------- ------------- --------------- -------------
Net increase from capital share
transactions..................... 271,597 2,003,500 199,441 2,008,865 140,615
------------- --------------- ------------- --------------- -------------
Total increase (decrease) in net
assets......................... 836,642 2,145,381 348,699 2,107,795 (173,463)
NET ASSETS:
Beginning of period.................. 2,156,501 11,120 2,118,915 11,120 1,959,746
------------- --------------- ------------- --------------- -------------
End of period........................ $ 2,993,143 $ 2,156,501 $ 2,467,614 $ 2,118,915 $ 1,786,283
------------- --------------- ------------- --------------- -------------
------------- --------------- ------------- --------------- -------------
Undistributed net investment income
at end of period................... $ -- $ 917 $ 2,305 $ 373 $ --
------------- --------------- ------------- --------------- -------------
------------- --------------- ------------- --------------- -------------
*Shares issued and repurchased:
Number of shares sold................ 23,665 200,336 18,144 200,524 17,933
Number of shares issued for
reinvestment of distributions...... 136 -- 2,331 336 101
Number of shares repurchased......... (397) -- (433) -- (130)
------------- --------------- ------------- --------------- -------------
Net increase....................... 23,404 200,336 20,042 200,860 17,904
------------- --------------- ------------- --------------- -------------
------------- --------------- ------------- --------------- -------------
**Distributions to contractholders:
Income dividends per share........... $ 0.0041 $ -- $ 0.03 $ 0.0167 $ 0.0035
Capital gain distributions per
share.............................. $ 0.0036 $ -- $ 0.08 $ -- $ --
<CAPTION>
FOR THE PERIOD
FROM 11/13/97
(COMMENCEMENT)
TO 12/31/97
<S> <C>
- ------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
Net investment income................ $ 748
Net realized gain (loss) from
investments, options and foreign
currency transactions.............. (5,657)
Net unrealized appreciation
(depreciation) of investments and
translation of assets and
liabilities in foreign currency
during the period.................. (51,465)
---------------
Net increase (decrease) in net
assets resulting from
operations....................... (56,374)
DISTRIBUTIONS TO CONTRACTHOLDERS FROM:*
Net investment income................ --
Net realized gain from investment
transactions....................... --
---------------
Total distributions to
contractholders.................. --
INCREASE FROM CAPITAL SHARE TRANSACTION
Proceeds from shares sold............ 2,005,000
Net asset value of shares issued for
reinvestment of distributions...... --
Cost of shares repurchased........... --
---------------
Net increase from capital share
transactions..................... 2,005,000
---------------
Total increase (decrease) in net
assets......................... 1,948,626
NET ASSETS:
Beginning of period.................. 11,120
---------------
End of period........................ $ 1,959,746
---------------
---------------
Undistributed net investment income
at end of period................... $ 748
---------------
---------------
*Shares issued and repurchased:
Number of shares sold................ 200,509
Number of shares issued for
reinvestment of distributions...... --
Number of shares repurchased......... --
---------------
Net increase....................... 200,509
---------------
---------------
**Distributions to contractholders:
Income dividends per share........... $ --
Capital gain distributions per
share.............................. $ --
</TABLE>
31
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH & INCOME
-------------------------------
FOR THE PERIOD
FOR THE FROM 11/13/97
YEAR ENDED (COMMENCEMENT)
12/31/98 TO 12/31/97
<S> <C> <C>
- ------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income................ $ 31,164 $ 4,102
Net realized gain (loss) from
investments, options and foreign
currency transactions.............. (72,218) --
Net unrealized appreciation
(depreciation) of investments and
translation of assets and
liabilities in foreign currency
during the period.................. 332,012 82,422
------------- ---------------
Net increase (decrease) in net
assets resulting from
operations....................... 290,958 86,524
DISTRIBUTIONS TO CONTRACTHOLDERS FROM:**
Net investment income................ (30,378) (3,018)
Net realized gain from investment
transactions....................... -- --
Tax return of capital................ -- --
------------- ---------------
Total distributions to
contractholders.................. (30,378) (3,018)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold............ 380,120 2,003,500
Net asset value of shares issued for
reinvestment of distributions...... 30,378 3,018
Cost of shares repurchased........... (6,893) --
------------- ---------------
Net increase from capital share
transactions..................... 403,605 2,006,518
------------- ---------------
Total increase (decrease) in net
assets......................... 664,185 2,090,024
NET ASSETS:
Beginning of period.................. 2,101,144 11,120
------------- ---------------
End of period........................ $ 2,765,329 $ 2,101,144
------------- ---------------
------------- ---------------
Undistributed net investment income
at end of period................... $ 1,870 $ 1,084
------------- ---------------
------------- ---------------
*Shares issued and repurchased:
Number of shares sold................ 35,979 200,341
Number of shares issued for
reinvestment of distributions...... 2,720 298
Number of shares repurchased......... (614) --
------------- ---------------
Net increase....................... 38,085 200,639
------------- ---------------
------------- ---------------
**Distributions to contractholders:
Income dividends per share........... $ 0.128 $ 0.015
Capital gain distributions per
share.............................. $ -- $ --
Tax return of capital................ $ -- $ --
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
<TABLE>
<CAPTION>
GLOBAL FIXED
BALANCED INTERMEDIATE FIXED INCOME INCOME
------------------------------- ------------------------------- -------------
FOR THE PERIOD FOR THE PERIOD
FOR THE FROM 11/13/97 FOR THE FROM 11/13/97 FOR THE
YEAR ENDED (COMMENCEMENT) YEAR ENDED (COMMENCEMENT) YEAR ENDED
12/31/98 TO 12/31/97 12/31/98 TO 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income................ $ 132,900 $ 15,759 $ 130,082 $ 14,654 $ 285,533
Net realized gain (loss) from
investments, options and foreign
currency transactions.............. 6,441 -- 29,696 (17) 136,328
Net unrealized appreciation
(depreciation) of investments and
translation of assets and
liabilities in foreign currency
during the period.................. (303,573) (10,180) (47,397) 11,282 (52,157)
------------- --------------- ------------- --------------- -------------
Net increase (decrease) in net
assets resulting from
operations....................... (164,232) 5,579 112,381 25,919 369,704
DISTRIBUTIONS TO CONTRACTHOLDERS FROM:**
Net investment income................ (132,856) (14,570) (127,884) (13,481) (271,758)
Net realized gain from investment
transactions....................... -- -- (15,985) -- (30,394)
-- -- -- -- (153,753)
------------- --------------- ------------- --------------- -------------
Total distributions to
contractholders.................. (132,856) (14,570) (143,869) (13,481) (455,905)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold............ 294,538 2,500,999 269,098 2,001,000 15,852
Net asset value of shares issued for
reinvestment of distributions...... 132,856 14,570 143,869 13,480 455,905
Cost of shares repurchased........... (4,447) -- (4,087) -- (1,805)
------------- --------------- ------------- --------------- -------------
Net increase from capital share
transactions..................... 422,947 2,515,569 408,880 2,014,480 469,952
------------- --------------- ------------- --------------- -------------
Total increase (decrease) in net
assets......................... 125,859 2,506,578 377,392 2,026,918 383,751
NET ASSETS:
Beginning of period.................. 2,517,698 11,120 2,038,038 11,120 5,098,865
------------- --------------- ------------- --------------- -------------
End of period........................ $ 2,643,557 $ 2,517,698 $ 2,415,430 $ 2,038,038 $ 5,482,616
------------- --------------- ------------- --------------- -------------
------------- --------------- ------------- --------------- -------------
Undistributed net investment income
at end of period................... $ 1,233 $ 1,189 $ 3,371 $ 1,173 $ 70,592
------------- --------------- ------------- --------------- -------------
------------- --------------- ------------- --------------- -------------
*Shares issued and repurchased:
Number of shares sold................ 30,307 250,101 26,057 200,100 1,540
Number of shares issued for
reinvestment of distributions...... 15,253 1,476 14,445 1,340 45,911
Number of shares repurchased......... (461) -- (401) -- (171)
------------- --------------- ------------- --------------- -------------
Net increase....................... 45,099 251,577 40,101 201,440 47,280
------------- --------------- ------------- --------------- -------------
------------- --------------- ------------- --------------- -------------
**Distributions to contractholders:
Income dividends per share........... $ 0.47 $ 0.058 $ 0.56 $ 0.067 $ 0.54
Capital gain distributions per
share.............................. $ -- $ -- $ 0.07 $ -- $ 0.06
$ -- $ -- $ -- $ -- $ 0.30
<CAPTION>
MONEY MARKET
-------------------------------
FOR THE PERIOD FOR THE PERIOD
FROM 11/13/97 FOR THE FROM 11/13/97
(COMMENCEMENT) YEAR ENDED (COMMENCEMENT)
TO 12/31/97 12/31/98 TO 12/31/97
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
Net investment income................ $ 35,836 $ 52,828 $ 7,147
Net realized gain (loss) from
investments, options and foreign
currency transactions.............. (14,457) -- --
Net unrealized appreciation
(depreciation) of investments and
translation of assets and
liabilities in foreign currency
during the period.................. 65,366 -- --
--------------- ------------- ---------------
Net increase (decrease) in net
assets resulting from
operations....................... 86,745 52,828 7,147
DISTRIBUTIONS TO CONTRACTHOLDERS FROM:*
Net investment income................ (40,097) (52,828) (7,147)
Net realized gain from investment
transactions....................... -- -- --
-- -- --
--------------- ------------- ---------------
Total distributions to
contractholders.................. (40,097) (52,828) (7,147)
INCREASE FROM CAPITAL SHARE TRANSACTION
Proceeds from shares sold............ 5,001,000 398,043 1,001,011
Net asset value of shares issued for
reinvestment of distributions...... 40,097 52,817 7,147
Cost of shares repurchased........... -- (199,682) --
--------------- ------------- ---------------
Net increase from capital share
transactions..................... 5,041,097 251,178 1,008,158
--------------- ------------- ---------------
Total increase (decrease) in net
assets......................... 5,087,745 251,178 1,008,158
NET ASSETS:
Beginning of period.................. 11,120 1,019,269 11,111
--------------- ------------- ---------------
End of period........................ $ 5,098,865 $ 1,270,447 $ 1,019,269
--------------- ------------- ---------------
--------------- ------------- ---------------
Undistributed net investment income
at end of period................... $ (13,775) $ -- $ --
--------------- ------------- ---------------
--------------- ------------- ---------------
*Shares issued and repurchased:
Number of shares sold................ 500,101 398,043 1,001,011
Number of shares issued for
reinvestment of distributions...... 3,966 52,817 7,147
Number of shares repurchased......... -- (199,682) --
--------------- ------------- ---------------
Net increase....................... 504,067 251,178 1,008,158
--------------- ------------- ---------------
--------------- ------------- ---------------
**Distributions to contractholders:
Income dividends per share........... $ 0.08 $ 0.049 $ 0.007
Capital gain distributions per
share.............................. $ -- $ -- $ --
$ -- $ -- $ --
</TABLE>
33
<PAGE>
NOTES TO FINANCIAL
STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
Investors Mark Series Fund (the Fund) is registered under the Investment Company
Act of 1940 (as amended) as a diversified open-end management investment company
of the series type. Shares of the Fund are distributed to a variable annuity
separate account of Business Men's Assurance Company of America. The following
is a summary of significant accounting policies consistently followed by the
Fund in the preparation of its financial statements.
A. SECURITY VALUATIONS -- Securities traded on U.S. or foreign securities
exchanges or included in a national market system are valued at the last quoted
sales price; securities for which there were no sales reported are valued at the
mean between the bid and ask prices; exchange listed options are valued at the
last sales price; bonds and other securities for which market quotations are not
readily available are valued at fair value according to methods selected in good
faith by the board of directors. Securities with maturities of 60 days or less
when acquired or subsequently within 60 days of maturity are valued at amortized
cost, which approximates market value.
Generally, trading in foreign securities markets is substantially completed each
day at various times prior to the close of the New York Stock Exchange. The
values of foreign securities are determined as of the close of such foreign
markets or the close of the New York Stock Exchange, if earlier. All investments
quoted in foreign currency are valued in U.S. dollars on the basis of the
foreign currency exchange rates prevailing at the close of business. Investment
in foreign securities may involve risks not present in domestic investments.
Since foreign securities may be denominated in a foreign currency and involve
settlement and pay interest or dividends in foreign currencies, changes in the
relationship of these foreign currencies to the U.S. dollar can significantly
affect the value of the investments and earnings of the Fund. Foreign
investments may also subject the Fund to foreign government exchange
restrictions, expropriation, taxation or other political, social or economic
developments, all of which could affect the market and/or credit risk of the
investments.
Pursuant to Rule 2a-7 of the Investment Company Act of 1940 (as amended),
securities in the Money Market Portfolio are valued at amortized cost, which
approximates market value.
B. OPTIONS -- When a call or put option is written, an amount equal to the
premium received is recorded as a liability. The liability is marked-to-market
daily to reflect the current market value of the option written. When a written
option expires, a gain is realized in the amount of the premium originally
received. If a closing purchase contract is entered into, a gain or loss is
realized in the amount of the original premium less the cost of the closing
transaction. If a written call is exercised, a gain or loss is realized from the
sale of the underlying security, and the proceeds from such sale are increased
by the premium originally received. If a written put option is exercised, the
amount of the premium originally received reduces the cost of the security which
is purchased upon exercise of the option.
Purchased options are recorded as investments. If a purchased option expires, a
loss is realized in the amount of the cost of the option. If a closing
transaction is entered into, a gain or loss is realized, to the extent that the
proceeds from the sale are greater or less than the cost of the option. If a put
option is exercised, a gain or loss is realized from the sale of the underlying
security by adjusting the proceeds from such sale by the amount of the premium
originally paid. If a call option is exercised, the cost of the security
purchased upon exercise is increased by the premium originally paid.
C. FOREIGN CURRENCY TRANSLATION -- All assets and liabilities expressed in
foreign currencies are converted into U.S. dollars based on current exchange
rates at the end of the period. Purchases and sales of investments in
securities, dividend and interest income, and certain expenses are translated at
the rates of exchange prevailing on the respective dates of such transactions.
The effects of changes in foreign currency exchange rates on investments in
securities are included in net realized and unrealized gain or loss of
investments in the Statement of Operations.
D. FORWARD FOREIGN CURRENCY CONTRACTS -- The Global Fixed Income Portfolio may
enter into forward foreign currency contracts as a way of managing foreign
exchange rate risk. The portfolio may enter into these contracts to fix the U.S.
dollar value of a security that it has agreed to buy or sell for the period
between the date the trade was entered into and the date the security is
delivered and paid for. These
34
<PAGE>
contracts may also be used to hedge the U.S. dollar value of securities owned
which are denominated in foreign currencies.
Forward foreign currency contracts are valued each day at the close of the New
York Stock Exchange at the forward rate, and are marked-to-market daily. The
change in market value is recorded as an unrealized gain or loss. When the
contract is closed, a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and closed is recorded.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the securities, but it does establish a rate of
exchange that can be achieved in the future. Although forward foreign currency
contracts limit the risk of loss due to a decline in the value of the hedged
currency, they also limit any potential gain that might result should the value
of the currency increase. These contracts involve market risk in excess of the
amount reflected in the Statement of Assets and Liabilities. The face or
contract amount in U.S. dollars reflects the total exposure the portfolio has in
that particular currency contract. In addition, there could be exposure to risks
(limited to the amount of unrealized gains) if the counterparties to the
contracts are unable to meet the terms of their contracts.
E. EXPENSE LIMITATIONS -- Investors Mark Advisor, LLC. (the Advisor), has
voluntarily agreed to pay certain operating expenses in an amount that limits
the total operating expenses of the portfolios to an annual rate of .50% of
average daily net assets for the Money Market Portfolio; .80% of average daily
net assets for the Intermediate Fixed Income Portfolio; .90% of the average
daily net assets for Mid Cap Equity, Large Cap Value, Large Cap Growth, Growth &
Income and Balanced Portfolios; 1.00% of average daily net assets for the Global
Fixed Income Portfolio and 1.05% of average daily net assets for the Small Cap
Equity Portfolio. This expense limitation may be modified or terminated at the
discretion of the Advisor at any time without notice to contractholders.
F. DISTRIBUTIONS TO CONTRACTHOLDERS -- Distributions to contractholders are
recorded on the ex-dividend date. The character of distributions made during the
year from net investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes. These differences are
primarily due to differing treatments for expiration of net operating losses and
recharacterization of foreign currency gains and losses.
G. FEDERAL INCOME TAXES -- The Fund complied with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
therefore, no provision for federal or state tax is required. The Global Fixed
Income Portfolio has designated $9,281 as capital gain dividends. At December
31, 1998, the Large Cap Growth, Small Cap Equity, and the Growth & Income
Portfolios have an accumulated net realized loss on sales of investments for
federal income tax purposes of $103,246, $267,437, and $66,440, respectively,
expiring in 2006, which are available to offset future taxable gains.
For corporate contractholders, the following percentages of ordinary income
distributions qualify for the corporate dividends received deduction:
<TABLE>
<CAPTION>
PORTFOLIO PERCENTAGE
<S> <C>
- ---------------------------------------------------
Large Cap Value........................ 72%
Large Cap Growth....................... 0%
Mid Cap Equity......................... 92%
Small Cap Equity....................... 0%
Growth & Income........................ 100%
Balanced............................... 28%
Intermediate Fixed Income.............. 1%
Global Fixed Income.................... 0%
Money Market........................... 0%
</TABLE>
H. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the date the securities are purchased or sold. Dividend income
and distributions to contractholders are recorded on the ex-dividend date.
Realized gains and losses from investment transactions are determined on the
identified cost basis.
I. USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from such
estimates.
35
<PAGE>
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
2. ADVISORY FEES
Advisory fees were paid to the Advisor based on an annual percentage of average
daily net assets. Listed below are advisory fees payable as a percentage of
average net assets.
<TABLE>
<CAPTION>
PORTFOLIO ADVISORY FEE
<S> <C>
- -----------------------------------------------------
Large Cap Value........................ 0.80%
Large Cap Growth....................... 0.80%
Mid Cap Equity......................... 0.80%
Small Cap Equity....................... 0.95%
Growth & Income........................ 0.80%
Balanced............................... 0.80%
Intermediate Fixed Income.............. 0.60%
Global Fixed Income.................... 0.75%
Money Market........................... 0.40%
</TABLE>
3. INVESTMENT TRANSACTIONS
Investment transactions for the year ended December 31, 1998, (excluding
maturities of short-term commercial notes and repurchase agreements) are as
follows:
<TABLE>
<CAPTION>
PROCEEDS
PORTFOLIO PURCHASES FROM SALES
<S> <C> <C>
- -------------------------------------------------------
Large Cap Value........................ $ 1,170,317 $ 497,612
Large Cap Growth....................... 1,196,454 1,135,158
Mid Cap Equity......................... 3,862,731 3,677,195
Small Cap Equity....................... 2,231,429 2,303,254
Growth & Income........................ 2,205,920 1,861,742
Balanced............................... 3,070,658 1,748,175
Intermediate Fixed Income.............. 3,198,963 2,791,312
Global Fixed Income.................... 9,716,792 9,367,734
</TABLE>
4. OPTIONS WRITTEN
The following options written were outstanding for the Global Fixed Income
Portfolio as of December 31, 1998:
PUT OPTIONS WRITTEN
<TABLE>
<CAPTION>
CURRENCY EXPIRATION DATE EXERCISE PRICE NUMBER OF CONTRACTS MARKET VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
New Zealand Dollar..................... Apr-99 65.250 1,800 $ (10,892)
New Zealand Dollar..................... Jul-99 62.000 1,900 (9,198)
German Deutschemark.................... Sep-99 75.000 1,925 (14,280)
German Deutschemark.................... Dec-99 105.760 1,000 (643)
German Deutschemark.................... Oct-99 108.100 1,750 (2,764)
German Deutschemark.................... Apr-99 90.720 1,000 (342)
German Deutschemark.................... Oct-99 107.680 1,750 (441)
German Deutschemark.................... Oct-99 107.410 1,050 (208)
German Deutschemark.................... Nov-99 100.730 1,750 (652)
German Deutschemark.................... Oct-99 100.800 2,650 (302)
French Franc........................... Oct-99 103.150 6,250 (816)
U.S. Dollars........................... Jun-99 123.500 1,250 (16,000)
U.S. Dollars........................... Feb-99 1.700 1,000 (2,910)
U.S. Dollars........................... Aug-99 126.000 1,050 (16,863)
U.S. Dollars........................... Oct-99 105.000 550 (2,475)
U.S. Dollars........................... Nov-99 102.000 1,000 (4,180)
U.S. Dollars........................... Nov-99 104.000 500 (2,445)
U.S. Dollars........................... Dec-99 102.000 1,250 (5,225)
U.S. Dollars........................... Apr-99 106.406 550 (1,186)
U.S. Dollars........................... Apr-99 101.910 1,000 (1,031)
U.S. Dollars........................... Feb-99 99.258 500 (2)
U.S. Dollars........................... Mar-99 97.922 500 (141)
U.S. Dollars........................... Mar-99 104.280 500 (1,399)
-------------
Total put options outstanding (premiums
received, $33,333)................... $ (94,395)
-------------
-------------
</TABLE>
36
<PAGE>
CALL OPTIONS WRITTEN
<TABLE>
<CAPTION>
CURRENCY EXPIRATION DATE EXERCISE PRICE NUMBER OF CONTRACTS MARKET VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Japanese Yen........................... Sep-99 145.000 750 $ (478)
Japanese Yen........................... Nov-99 142.000 1,000 (950)
Japanese Yen........................... Nov-99 148.500 500 (345)
Japanese Yen........................... Dec-99 130.000 1,250 (2,650)
German Deutschemark.................... Oct-99 118.080 1,750 (375)
German Deutschemark.................... Oct-99 117.910 1,050 (233)
German Deutschemark.................... Nov-99 109.070 1,750 (662)
German Deutschemark.................... Dec-99 115.760 1,000 (102)
German Deutschemark.................... Oct-99 105.900 2,650 (239)
French Franc........................... Oct-99 113.150 6,250 (615)
U.S. Dollar............................ Sep-99 1.590 1,000 (7,850)
U.S. Dollar............................ Apr-99 114.080 550 (52)
U.S. Dollar............................ Apr-99 112.310 1,000 (250)
U.S. Dollar............................ Jan-99 110.429 500 (985)
-------------
Total call options outstanding
(premiums received, $38,088)......... $ (15,786)
-------------
-------------
</TABLE>
Transactions in options written for the Global Fixed Income Portfolio for the
year ended December 31, 1998, were as follows:
<TABLE>
<CAPTION>
NUMBER OF PREMIUM
CONTRACTS AMOUNT
<S> <C> <C>
- ---------------------------------------------------------------
CALL OPTIONS WRITTEN
Balance at December 31, 1997........... 2,352,500 $ 5,946
Opened................................. 27,250 50,969
Expired................................ (2,353,750) (6,629)
Closed................................. (5,000) (12,198)
----------- ---------
Balance at December 31, 1998........... 21,000 $ 38,088
----------- ---------
----------- ---------
PUT OPTIONS WRITTEN
Balance at December 31, 1997........... -- $ --
Opened................................. 113,925 49,259
Expired................................ (4,050) (2,958)
Closed................................. (77,400) (12,968)
----------- ---------
Balance at December 31, 1998........... 32,475 $ 33,333
----------- ---------
----------- ---------
</TABLE>
37
<PAGE>
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
5. FORWARD FOREIGN CURRENCY CONTRACTS
Following is a summary of forward foreign currency contracts that were
outstanding at December 31, 1998 for the Global Fixed Income Portfolio
(excluding foreign currency contracts used for purchase and sale settlements):
CONTRACTS TO SELL CURRENCY:
<TABLE>
<CAPTION>
FOREIGN AMOUNT TO BE NET UNREALIZED
SETTLEMENT CURRENCY RECEIVED IN U.S. $ VALUE APPRECIATION
DATE TO BE DELIVERED U.S. $ AS OF 12/31/98 (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Argentine Peso......................... 1/6/99-4/6/99 76,755 $ 75,486 $ 76,581 $ (1,095)
Australian Dollar...................... 3/11/99 75,000 50,262 45,794 4,468
Canadian Dollar........................ 1/29/99 80,738 52,106 52,485 (379)
German Deutschemark.................... 1/20/99-5/6/99 2,568,668 1,536,046 1,543,536 (7,490)
Danish Krone........................... 1/11/99-5/6/99 2,514,986 391,828 396,860 (5,032)
French Franc........................... 2/12/99 296,995 53,035 52,973 62
British Pound.......................... 2/5/99-11/5/99 647,330 1,068,316 1,072,795 (4,479)
Greek Drachma.......................... 4/22/99 37,050,000 116,689 129,202 (12,513)
Italian Lira........................... 4/29/99 132,800,000 81,319 80,995 324
Japanese Yen........................... 2/5/99-3/29/99 65,165,844 488,928 575,340 (86,412)
Dutch Guilder.......................... 4/15/99 33,450 18,130 17,901 229
New Zealand Dollar..................... 3/11/99-4/15/99 552,991 295,137 292,365 2,772
Poland Zlotty.......................... 7/24/00 82,198 19,506 23,418 (3,912)
Swedish Krona.......................... 1/19/99-2/12/99 1,540,126 195,994 190,341 5,653
------------- --------------- ---------------
$ 4,442,782 $ 4,550,586 $ (107,804)
------------- --------------- ---------------
------------- --------------- ---------------
</TABLE>
38
<PAGE>
CONTRACTS TO BUY CURRENCY:
<TABLE>
<CAPTION>
FOREIGN AMOUNT TO BE NET UNREALIZED
SETTLEMENT CURRENCY PAID IN U.S. $ VALUE APPRECIATION
DATE TO BE RECEIVED U.S. $ AS OF 12/31/98 (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Argentine Peso......................... 1/6/99 51,117 $ 50,835 $ 51,139 $ 304
Australian Dollar...................... 3/11/99 75,000 52,986 45,794 (7,192)
Canadian Dollar........................ 1/29/99 80,738 53,190 52,485 (705)
German Deutschemark.................... 2/17/99-4/22/99 1,451,147 865,334 871,867 6,533
Danish Krone........................... 3/16/99 348,898 55,868 55,037 (831)
Greek Drachma.......................... 4/22/99 37,050,000 113,321 129,202 15,881
Italian Lira........................... 4/29/99 78,042,502 47,298 47,598 300
Japanese Yen........................... 1/11/99-3/29/99 49,927,742 416,934 440,086 23,152
New Zealand Dollar..................... 3/11/99-11/5/99 352,952 187,257 186,335 (922)
Poland Zlotty.......................... 7/24/00 82,198 20,000 23,418 3,418
Swedish Krona.......................... 1/19/99 304,130 37,687 37,557 (130)
------------- --------------- ---------------
$ 1,900,710 $ 1,940,518 $ 39,808
------------- --------------- ---------------
------------- --------------- ---------------
</TABLE>
39
<PAGE>
FINANCIAL
HIGHLIGHTS
<TABLE>
<CAPTION>
LARGE CAP VALUE
-----------------------
FOR THE
PERIOD
FROM
11/13/97
CONDENSED DATA FOR A SHARE OF CAPITAL FOR THE (COMMENCEMENT)
STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED TO
PERIOD. 12/31/98 12/31/97
<S> <C> <C>
- ----------------------------------------------------------------
Net asset value, beginning of period... $ 9.69 $ 10.00
---------- ----------
Income from investment operations:
Net investment income.............. 0.1285 0.0291
Net gains (losses) on securities
(both realized and unrealized)... 0.3515 (0.3141)
---------- ----------
Total income (loss) from investment
operations......................... 0.4800 (0.2850)
---------- ----------
Less distributions:
Dividends from net investment
income........................... (0.1400) (0.0250)
Distributions from capital gains... (0.1500) --
---------- ----------
Total distributions.................. (0.2900) (0.0250)
---------- ----------
Net asset value, end of period......... $ 9.88 $ 9.69
---------- ----------
---------- ----------
Total return........................... 5.03% (2.86%)
Ratios/Supplemental Data
Net assets, end of period (in
millions)............................ $ 3.2 $ 2.4
Ratio of expenses to average net
assets............................... 0.90% 0.90%
Ratio of net investment income (loss)
to average net assets................ 1.44% 2.21%
Ratio of expenses to average net assets
before voluntary expense
reimbursement........................ 1.55% 2.78%
Ratio of net investment income (loss)
to average net assets before
voluntary expense reimbursement...... 0.79% 0.33%
Portfolio turnover rate................ 18% --
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40
<PAGE>
<TABLE>
<CAPTION>
LARGE CAP GROWTH MID CAP EQUITY SMALL CAP EQUITY
----------------------- ----------------------- -----------------------
FOR THE FOR THE FOR THE
PERIOD PERIOD PERIOD
FROM FROM FROM
11/13/97 11/13/97 11/13/97
FOR THE (COMMENCEMENT) FOR THE (COMMENCEMENT) FOR THE (COMMENCEMENT)
YEAR ENDED TO YEAR ENDED TO YEAR ENDED TO
12/31/98 12/31/97 12/31/98 12/31/97 12/31/98 12/31/97
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period... $ 10.71 $ 10.00 $ 10.49 $ 10.00 $ 9.72 $ 10.00
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income.............. (0.0027) 0.0046 0.0385 0.0185 (0.0443) 0.0037
Net gains (losses) on securities
(both realized and unrealized)... 2.6104 0.7054 0.6915 0.4882 (1.5322) (0.2837)
---------- ---------- ---------- ---------- ---------- ----------
Total income (loss) from investment
operations......................... 2.6077 0.7100 0.7300 0.5067 (1.5765) (0.2800)
---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment
income........................... (0.0041) -- (0.0300) (0.0167) (0.0035) --
Distributions from capital gains... (0.0036) -- (0.0800) -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions.................. (0.0077) -- (0.1100) (0.0167) (0.0035) --
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period......... $ 13.31 $ 10.71 $ 11.11 $ 10.49 $ 8.14 $ 9.72
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Total return........................... 24.35% 7.10% 7.03% 5.07% (16.22%) (2.80%)
Ratios/Supplemental Data
Net assets, end of period (in
millions)............................ $ 3.0 $ 2.2 $ 2.5 $ 2.1 $ 1.8 $ 2.0
Ratio of expenses to average net
assets............................... 0.90% 0.90% 0.90% 0.90% 1.05% 1.05%
Ratio of net investment income (loss)
to average net assets................ (0.02%) 0.33% 0.38% 1.34% (0.52%) 0.29%
Ratio of expenses to average net assets
before voluntary expense
reimbursement........................ 1.66% 3.19% 2.38% 3.40% 2.29% 3.49%
Ratio of net investment income (loss)
to average net assets before
voluntary expense reimbursement...... (0.78%) (1.96%) (1.10%) (1.16%) (1.76%) (2.15%)
Portfolio turnover rate................ 49% -- 166% 13% 132% 8%
</TABLE>
41
<PAGE>
FINANCIAL
HIGHLIGHTS
<TABLE>
<CAPTION>
GROWTH & INCOME
-----------------------
FOR THE
PERIOD
FROM
11/13/97
CONDENSED DATA FOR A SHARE OF CAPITAL FOR THE (COMMENCEMENT)
STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED TO
PERIOD. 12/31/98 12/31/97
<S> <C> <C>
- ----------------------------------------------------------------
Net asset value, beginning of period... $ 10.41 $ 10.00
---------- ----------
Income from investment operations:
Net investment income.............. 0.1304 0.0204
Net gains (losses) on securities
(both realized and unrealized)... 1.1176 0.4046
---------- ----------
Total income (loss) from investment
operations......................... 1.2480 0.4250
---------- ----------
Less distributions:
Dividends from net investment
income........................... (0.1280) (0.0150)
Distributions from capital gains... -- --
Tax return of capital.............. -- --
---------- ----------
Total distributions.................. (0.1280) (0.0150)
---------- ----------
Net asset value, end of period......... $ 11.53 $ 10.41
---------- ----------
---------- ----------
Total return........................... 12.03% 4.25%
Ratios/Supplemental Data
Net assets, end of period (in
millions)............................ $ 2.8 $ 2.1
Ratio of expenses to average net
assets............................... 0.90% 0.90%
Ratio of net investment income (loss)
to average net assets................ 1.23% 1.50%
Ratio of expenses to average net assets
before voluntary expense
reimbursement........................ 1.75% 3.19%
Ratio of net investment income (loss)
to average net assets before
voluntary expense reimbursement...... 0.38% (0.79%)
Portfolio turnover rate................ 76% --
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
42
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE FIXED MONEY
BALANCED INCOME GLOBAL FIXED INCOME MARKET
----------------------- ----------------------- ----------------------- ----------
FOR THE FOR THE FOR THE
PERIOD PERIOD PERIOD
FROM FROM FROM
11/13/97 11/13/97 11/13/97
FOR THE (COMMENCEMENT) FOR THE (COMMENCEMENT) FOR THE (COMMENCEMENT) FOR THE
YEAR ENDED TO YEAR ENDED TO YEAR ENDED TO YEAR ENDED
12/31/98 12/31/97 12/31/98 12/31/97 12/31/98 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period... $ 9.96 $ 10.00 $ 10.06 $ 10.00 $ 10.09 $ 10.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income.............. 0.4694 0.0627 0.5681 0.0728 0.8423 0.0887 0.0494
Net gains (losses) on securities
(both realized and unrealized)... (1.0794) (0.0447) (0.0481) 0.0542 (0.1123) 0.0813 --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total income (loss) from investment
operations......................... (0.6100) 0.0180 0.5200 0.1270 0.7300 0.1700 0.0494
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment
income........................... (0.4700) (0.0580) (0.5600) (0.0670) (0.5423) (0.0800) (0.0494)
Distributions from capital gains... -- -- (0.0700) -- (0.0600) -- --
-- -- -- -- (0.3000) -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions.................. (0.4700) (0.0580) (0.6300) (0.0670) (0.9000) (0.0800) (0.0494)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period......... $ 8.88 $ 9.96 $ 9.95 $ 10.06 $ 9.92 $ 10.09 $ 1.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total return........................... (6.03%) 0.18% 5.16% 1.27% 7.23% 1.70% 5.05%
Ratios/Supplemental Data
Net assets, end of period (in
millions)............................ $ 2.6 $ 2.5 $ 2.4 $ 2.0 $ 5.5 $ 5.1 $ 1.3
Ratio of expenses to average net
assets............................... 0.90% 0.90% 0.80% 0.80% 1.00% 1.00% 0.50%
Ratio of net investment income (loss)
to average net assets................ 5.00% 4.78% 5.75% 5.40% 5.40% 5.29% 4.93%
Ratio of expenses to average net assets
before voluntary expense
reimbursement........................ 1.59% 2.78% 1.97% 3.09% 1.47% 2.28% 2.89%
Ratio of net investment income (loss)
to average net assets before
voluntary expense reimbursement...... 4.31% 2.90% 4.58% 3.11% 4.93% 4.01% 2.54%
Portfolio turnover rate................ 73% -- 132% 39% 185% 25% --
<CAPTION>
FOR THE
PERIOD
FROM
11/13/97
(COMMENCEMENT)
TO
12/31/97
<S> <C>
- ------------------------------------------------------------------
Net asset value, beginning of period... $ 1.00
----------
Income from investment operations:
Net investment income.............. 0.0071
Net gains (losses) on securities
(both realized and unrealized)... --
----------
Total income (loss) from investment
operations......................... 0.0071
----------
Less distributions:
Dividends from net investment
income........................... (0.0071)
Distributions from capital gains... --
--
----------
Total distributions.................. (0.0071)
----------
Net asset value, end of period......... $ 1.00
----------
----------
Total return........................... 0.71%
Ratios/Supplemental Data
Net assets, end of period (in
millions)............................ $ 1.0
Ratio of expenses to average net
assets............................... 0.50%
Ratio of net investment income (loss)
to average net assets................ 5.26%
Ratio of expenses to average net assets
before voluntary expense
reimbursement........................ 4.90%
Ratio of net investment income (loss)
to average net assets before
voluntary expense reimbursement...... 0.86%
Portfolio turnover rate................ --
</TABLE>
43
<PAGE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND CONTRACTHOLDERS
OF INVESTORS MARK SERIES FUND, INC.
We have audited the accompanying statements of assets and liabilities,
including the statements of net assets, of Investors Mark Series Fund, Inc. (the
Fund) (comprised of the Large Cap Value, Large Cap Growth, Mid Cap Equity, Small
Cap Equity, Growth & Income, Balanced, Intermediate Fixed Income, Global Fixed
Income and Money Market portfolios) as of December 31, 1998, and the related
statements of operations for the year then ended and the statements of changes
in net assets and financial highlights for the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
investments owned as of December 31, 1998, by correspondence with the custodian.
As to securities relating to uncompleted transactions, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the portfolios of the Fund at December 31, 1998, the results of their
operations, the changes in their net assets and the financial highlights for the
periods indicated therein in conformity with generally accepted accounting
principles.
[SIGNATURE]
Kansas City, Missouri
February 12, 1999
44
<PAGE>
THIS REPORT HAS BEEN PREPARED FOR THE INFORMATION OF THE CONTRACTHOLDERS OF
INVESTORS MARK SERIES FUND, INC. AND IS NOT TO BE CONSTRUED AS AN OFFERING OF
THE SHARES OF THE FUND. SHARES OF THE FUND ARE OFFERED ONLY BY THE PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED FROM BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA.
45
